25 Mar 9 Good reasons to consider a Buy-out-Bond (BoB) when changing employments.
Gone are the days when a job for life is the norm, and gone are the days when we can all look forward to a state pension at 65. The movement in the employment market and the onus on us to manage our retirement plans has never been greater. Compulsory redundancies, people unafraid to follow their dreams and leave a ‘secure’ job to become self-employed or simply move jobs to become more fulfilled is now normal for many.
The movement in employment has brought with it the ‘parking’ of accumulated retirement funds earned in previous employers’ occupational pension schemes (OPS). When you left employment with an OPS, you were issued with a leaver option statement by the pension trustees giving you the option to either leave your ‘pension pot’ invested in the scheme until retirement or transfer it to another approved ‘pension pot’.
Leaving your accumulated fund with a previous employer means you will have to contact the scheme trustees to access it at retirement. This could be an obstacle if the has company liquidated in the meantime leading to the problem of not knowing where to start looking for your pension fund. Not alone that, but what control will you have over the investment choice and risk of your funds between leaving and retirement.
Some individuals will automatically transfer their fund to the OPS of their new employer. This may not be the best option either. The BoB or Personal Retirement Bond (PRB) as it is sometimes called has increased in popularity and let’s look at why this is:
- Removes need to go through trustees to access retirement fund
- Trustee signatures no longer required in dealing with the fund
- Removes need for member to stay in touch with previous employer/trustees
- All future correspondence will go direct to member
- Gives member total control over investment decision
- Gives member control over timing of benefits in accordance with pension rules with earliest opportunity from age 50 onwards without needing to retire
- No difficulties for member if for any reason company/trustees cease to exist subsequent to transfer
- Member will have the same retirement options as were allowed by rules of purchasing scheme
- Full value of BoB is payable to estate on death
In pension matters, advice is always recommended to ensure the best solution is taken in such decisions. The BoB may not always be the best option for you if for example some valuable guarantee was forfeited by a transfer, so get independent financial advice before making a decision and remember putting this matter on the long finger is a decision too. It is always best to evaluate these decisions when they are fresh in the mind.