Personal Finance Q & A

Your queries answered by DOMINIC COYLE

Your queries answered by DOMINIC COYLE

Releasing money from a Tesco pension?

Q

My wife worked for Tesco for 17 years. When we started a family five years ago she decided to leave that employment and raise our children.

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She has a letter from Tesco as regards her pension. It allows her to leave the money with the fund until she reaches retirement or transfer it to a different pension, etc.

As with many people, circumstance changed in the past few years.

The amount in the fund is relatively small, and will pay a very small amount on reaching retirement age in another 25 years – about €1,000 per annum. As this money would be of a great deal more benefit in the here and now, is there any way to release it?

- Mr M M, E-mail

A

Regardless of the size of the fund, you are not going to be allowed to withdraw the money from your pension until the retirement age set down in the scheme.

The deal with pensions is that the State allows fairly generous relief from taxes on money paid in on the basis that it will be used to part-fund your retirement.

Only in limited circumstances – and in the very early years of membership – can a person opt to close their fund and receive the money back, net of tax.

Many people are in the same position as your wife, working in several places over a career or taking a break from working outside the home.

It is possible to transfer the money from your Tesco pension into a buy-out bond which would give you slightly more control over investment options, but it still would not give you access to the funds until the minimum retirement age provided for in the Tesco scheme – and you have the possibility of facing higher charges than a major employer like Tesco might be able to secure.

The other complication is that, as I understand it, Tesco operates a defined benefit pension scheme. Given the guarantees this provides compared to the investment risk you will be assuming in a buy-out bond, you would be advised to leave any defined benefit pension put where it is, unless you have severe doubts about the possibility of the company surviving through to your wife drawing down her pension in 15 years – a most unlikely issue for a company like Tesco.

Investing rather than cashing a pension

Q

In a variation of the “waived pension” query last month, what is the position about not drawing down my company pension, which is a New Ireland Retirement Bond, but leaving it to hopefully increase instead of buying other guaranteed investments, annuities or ARFs.

I can live on the State Old Age Pension and savings interest for the next few years.

- Mr N D, E-mail

A

As it happens, what you have is a buy-out bond (or personal retirement bond), presumably having transferred your money from an occupational scheme at some point. To the best of my knowledge, you cannot leave the money in this bond when you retire but, subject to minimum thresholds, you will be allowed to transfer it to an Approved Retirement Fund (ARF) which could mimic the investment strategy of which you seem to approve. Obviously, you need to bear in mind that keeping the money invested leaves you open to investment losses.

Dominic Coyle

Dominic Coyle

Dominic Coyle is Deputy Business Editor of The Irish Times