What are Enhanced Transfer Values in Ireland

If you’re pondering over accepting an Enhanced Transfer Value, it’s likely you qualify if you’re a deferred member of a Defined Benefit pension scheme and no longer work with that company. In such cases, you have the option to receive an entitlement in return for moving out of the scheme.

This option presents a unique chance for members to move their pension value to a different plan under better conditions, and it also helps the company and trustees reduce pension scheme risks. We guide clients through each phase of an ETV project, including crafting the offer, effectively communicating it, and assessing the financial outcomes based on the number of participants who accept the offer.

What are Enhanced Transfer Values in Ireland?

An Enhanced Transfer Value is provided to individuals who were once part of a Defined Benefit pension transfer value scheme. This type of pension transfer value offers a secured yearly income for the duration of your life. Your employer contributes to your pension scheme and ensures there’s adequate funding for your retirement. Thus, if you were previously employed in a company that provided this pension scheme and have since left, you are now a “Deferred member” of that scheme.

Deferred members are former participants of an occupational pension scheme who haven’t yet retired. As such a member, you may receive an offer from your previous employer for a defined pension transfer value. Essentially, an Enhanced Transfer Value Pension involves withdrawing funds from your existing pension to transfer them to a different pension plan. Your previous employer will present a cash value, facilitating your move to another pension.

It’s crucial to note that this offer may be substantially high for a limited time. However, the funds aren’t accessible as direct cash. You’ll need to decide whether to retain it in the current scheme or transfer it elsewhere.

Understanding Enhanced Transfer Values

Is accepting an Enhanced Transfer Value Pension advisable?

Making an informed choice requires understanding the benefits and drawbacks of this process. Given the limited decision-making time your employer might provide, quick decision-making is essential. It’s wise to consult a qualified financial advisor before deciding. A financial advisor can evaluate your situation and offer personalized guidance. Often, your former employer covers the cost of financial advice for everyone.

Nevertheless, you have the option to seek impartial professional advice regarding your Enhanced Transfer Pension Value offer.

Pros of an Enhanced Transfer Value	Cons of an Enhanced Transfer Value
The temporary value is significantly high.	The income isn’t guaranteed or fixed.
You gain control over your fund’s investments.	Investment values can fluctuate.
There’s a possibility of a larger tax-free lump sum.	Management fees apply to your investment fund.
These benefits are more easily inheritable.	Limited time is available for decision-making.
A default product might be set up for transferring this value.

Why do employers offer this?

Employers use Enhanced Transfer Values to minimize the scheme’s liabilities and costs, preserving the fund for current employees.

Example:

Joan, 52, previously worked for a company with a Defined Benefit Pension Transfer Value Scheme. She was approached regarding an Enhanced Transfer Value to relocate her fund. Typically, her old employer’s offer would be €280,000, but they’re temporarily proposing €400,000.

If Joan Stays In The Scheme:

• She’ll receive €10,000 annually upon retirement.
• This annuity guarantees lifetime income, ceasing upon her death.
• The scheme permits a surviving spouse to inherit 50% of the annuity, or €5,000 yearly.

If Joan Leaves The Scheme:

• She transfers her €400,000 fund to a Personal Retirement Bond.
• At 66, upon leaving her job, she can access her retirement benefits.
• She can withdraw 25% of this fund tax-free.
• With the remaining 75%, she can purchase an annuity or invest in an Approved Retirement Fund.

Joan decides to accept the offer. With a pension scheme in her current job, she’s familiar with investment risks. She’s also aware that her fund’s value could decrease as well as increase. Although her former employer’s pension assures a fixed retirement income, being single, she has no need to leave a portion of her annuity to a partner. Joan wishes to use the higher tax-free lump sum for home improvements and desires to leave inheritable funds. Her house, worth €500,000, exceeds the €335,000 inheritance threshold. Joan wants to ensure there’s cash in her estate for inheritance tax purposes.

Seeking Expert Advice: How can F J Hanly & Associates assist with defined pension transfer values?

The key is to seek advice promptly. Understanding the offer’s benefits can be complex, so clarity on the offer and your options is vital.

If you’ve received an Enhanced Transfer Pension Value offer from a past employer, contact F J Hanly & Associates. Our qualified financial advisors offer affordable, tailored advice on defined pension transfer values. By analysing your situation and your former employer’s offer, we’ll guide you towards the best decision.