Gone are the days when people worked for the same employer for 50 years. By the time we retire, most of us will have worked at several different companies, perhaps in different countries and even in different industries. In the course of your career, you probably will have accumulated pension money through a company pension plan. If you changed employers and did not move your pension, chances are good that you have more than one pension plan.
Since the Pension Act took effect in 2000 as part of the National Pension Scheme [NPS], one of the most common questions we get in the pension business is: “How do I deal with my defined contribution pension plan when I leave an employer?”
Your pension options once you leave will depend on your previous employer’s pension rules. Most pension members have 90 days from the date they cease working to move the pension money out of the former employer’s plan and transfer it either to your new company’s plan or into an individual pension plan.
If you have started with a new employer, you can speak with your HR department to confirm the pension-plan rules and make sure they allow for your old pension plan to be rolled over into the new one. If they do allow it, then you can move your previous pension money into the new company’s pension plan. All you need do is contact the new pension administrator of the new company’s plan to obtain the necessary paperwork to ensure your pension is rolled over correctly. More importantly, nothing changes to those old pension contributions; locked-in contributions will still be locked in, and voluntary contributions will still be classified as voluntary.
One benefit of rolling over your pension is that it allows you to keep all your pension funds under one roof and have one investment strategy for your money, as opposed to having different pension accounts at different providers and paying multiple sets of fees. Look at it as consolidating your pension money to keep your retirement savings organised and simplified.
If you are between jobs, you will need to roll your pension money over into an individual pension plan while you are on the search. Again, nothing changes on those old pension contributions; locked-in contributions will still be locked in and voluntary contributions will still be voluntary. Each pension provider on island has individual pension plans. At Freisenbruch-Meyer, we call our individual pension plan a Personal Retirement Plan [PRP]. It is important to shop around to make sure you understand your individual pension-plan options and what fees are associated with those individual plans. Once you have made your decision, your pension-plan provider will fill out the paperwork with you and help roll over those pension funds into your new individual pension-plan account.
Another important area to note is that you can roll your individual pension plan into a group plan [company plan] or vice versa, and you can roll from one group plan to another group plan. However, what you cannot do is start drawing down on those funds until you have retired, unless you are applying for a withdrawal under financial hardship.
Lastly, make sure you know where your pension[s] are, consolidate them if you can and design an investment strategy that will give you a clear direction, so you can be on the right path toward retirement.
– Carla Seely is the Vice President of Pensions, Life and Investments at Freisenbruch-Meyer, if you would like any further details, please contact [email protected] or call 441 297 8686