Pensions - changing circumstances

What happens if my circumstances change?

Your pension benefits will be affected if you:

If you are made redundant?
If you become ill or cannot work?
If you change your working arrangements?
If you decide to retire early?
If you move jobs
What happens to your retirement if you die?

If you are made redundant?

Employer pension plan: If you were less than two years in your employer’s pension plan, you may be able to get back any contributions you made to the plan in cash, though you will have to pay income tax on it. You cannot take contributions made by your employer. If you have been in the pension plan for two years or more, you usually have to keep your pension benefits. Your options may then include:

keeping them in your old employer's plan until you retire;
transferring them to your new employer's pension plan;
transferring them to a Personal Retirement Savings Account, PRSA ; or
moving them to a special pension policy called a Buy-Out Bond.

Before you leave your job, ask your employer for an ‘options’ letter.

Personal pension plan: Some personal pension plans allow you to stop paying contributions for a time or to increase or reduce your contributions, although this may be subject to a minimum level of contribution and a charge.

You can continue to hold onto your pension if you move to another job or start working for yourself. You will not get tax relief on any further contributions you pay to your personal pension plan, unless you have new self employed earnings, or you move to a job where an employer pension plan is not available to you.

PRSA: You are free to stop, start, increase and decrease your contributions at any time, although your provider may require prior notice of a change. However, if you don’t pay into a PRSA for two years or more, and the balance is less than €650, then the PRSA provider can cancel your PRSA and refund the balance to you, less tax. The provider has to give you three months notice before doing this.

You can continue to hold onto your PRSA if you move to another job or start working for yourself. You will not get tax relief on any further contributions you pay to your PRSA unless you have new self employed earnings, or you move to a job where an employer pension plan is not available to you.

If you become ill or cannot work?

You can retire at any age if you become permanently ill or disabled. However, your retirement benefits may be lower because your contributions to your pension are stopping early and the money in your pension fund will have to last longer.

Employer pension plan: Some employers provide an enhanced ill-health pension for their employees if they have to retire early due to bad health. If your employer does not provide ill-health pension benefits, you could take out income protection insurance (also known as permanent health insurance or PHI). This can replace part of your income for as long as you are unable to work due to ill-health and could provide you with a regular income until you reach retirement age, but it is not the same as a pension.

Personal pension plan and Personal Retirement Savings Accounts, PRSAs: If you are unable to work for a time, you can stop all contributions to your personal pension, or reduce them.

You can draw on your personal pension plan or PRSA at any time if you become permanently unable, through sickness or disability, to work at your normal occupation or any other similar occupation for which you are suitable or trained. However, the amount you get will be much less than if you contributed up to your original expected retirement age, because you will have paid fewer contributions and these will have been invested for a shorter time.

If you change your working arrangements?

Employer pension plan: Changing your work arrangement, for example taking a career break, moving to part-time employment, job sharing, or taking extended maternity leave could impact on your benefits.

Ask your employer what effect, if any, your new arrangement will have on your retirement benefits. If you envisage a shortfall, for example due to taking a career break or working part time, you should consider topping up your benefits with additional voluntary contributions (AVCs) or notional service purchase (NSP), if you are in a public sector superannuation scheme.

Personal pension plan: Some personal pension plans allow you to stop paying contributions for a time or to increase or reduce your contributions, although this may be subject to a minimum level of contribution and a charge.

PRSA: You are free to stop, start, increase and decrease your contributions at any time, although your provider may require prior notice of a change. However, if you don’t pay into a Personal Retirement Savings Account, PRSA for two years or more, and the balance is less than €650, then the PRSA provider can cancel your PRSA and refund the balance to you, less tax. The provider has to give you three months notice before doing this.

With all private pensions, the benefits you receive depend partly on how much is contributed, so if you stop or reduce your contributions, you will end up with smaller benefits when you retire. Depending on your circumstances, you could top up your benefits with additional voluntary contributions (AVCs) or notional service purchase (NSP), if you are in a public sector superannuation scheme.

If you decide to retire early?

Employer pension plan: If the pension trustees and your employer agree, you may be able to retire from 50 onwards. This is sometimes called ‘voluntary early retirement'. If you retire early, your retirement benefits will be much lower than if you worked up to your expected retirement age, which is usually 65. This is because you will have shorter service and fewer contributions will have been paid into the plan for you. In addition, your retirement benefits will have to be spread out over a longer period of time.

Depending on your circumstances, you could consider funding a shortfall in your retirement benefits with additional voluntary contributions (AVCs) or notional service purchase (NSP), if you are in a civil service superannuation scheme.

Personal pension plan: You need to be 60 or over before you can start taking benefits (unless your occupation is one where people usually retire before age 60). If you do take benefits before age 60, they will be lower than if you waited to take benefits from age 60 onwards.

PRSA: If you are an employee, you can take benefits from your Personal Retirement Savings Account, PRSA on early retirement from 50 onwards. If you are self employed then you need to be 60 or over in order to take benefits from your PRSA (unless your occupation is one where people usually retire before age 60). Your retirement benefits will be much lower than if you waited to take them from 60 onwards.

If you move jobs

Employer pension plan: You have a number of options. You should consider them carefully and get financial advice to help you make the right decision.

If you were less than two years in your employer’s pension plan, you may be able to get back any contributions you made to the plan in cash, though you will have to pay income tax on it. You cannot take contributions made by your employer. If you have been in the pension plan for two years or more, you usually have to keep your pension benefits. Your options may then include:

keeping them in your old employer's plan until you retire;
transferring them to your new employer's pension plan;
transferring them to a Personal Retirement Savings Account. PRSA; or
moving them to a special pension policy called a Buy-Out Bond.

Before you leave your job, ask your employer for an ‘options’ letter.

If the pension benefits with your new employer are not as good as your previous scheme then, depending on your circumstances, you could consider topping up your benefits with additional voluntary contributions (AVCs) or notional service purchase (NSP), if you are in a civil service superannuation scheme.

Personal pension plan: Some personal pension plans allow you to stop paying contributions for a time or to increase or reduce your contributions, although this may be subject to a minimum level of contribution and a charge.

What happens to your retirement if you die?

Employer pension plan: Your plan will have rules about what the fund will pay out to your dependants if you die while you are still employed. A lump sum will normally be paid, up to a maximum of 4 times your salary at the date of death.

Ask your employer for information about the 'death-in-service' benefits of your plan. You should take this into account when deciding how much life insurance cover you need, or when you make a will.

Personal pension plan and Personal Retirement Savings Accounts: The value of your plan passes on to your estate for the benefit of your dependents. You need to consider the value of your retirement benefits when deciding how much life insurance cover you need, or when you make a will.