First things first
What is a Buy Out Bond?
You can consolidate your pension benefits from the various jobs you may have
held throughout your career into Buy Out Bonds, which you own and control. The
value of benefits you may have built up in a former employer’s pension scheme are
calculated and this ‘transfer value’ is then paid into your Buy Out Bond.
Once in the Buy Out Bond, the ‘transfer value’ is then invested in a fund or series
of funds. Because you control the Buy Out Bond, you choose how to invest this
money and when you can draw on it. This level of control is a great benefit of a Buy
Out Bond. If you leave your pension benefits in former employers’ schemes you
have no control over how the funds are invested.
Buy Out Bonds are also a flexible product. You can transfer the funds built up in your
Buy Out Bond to another Buy Out Bond with a different life insurance company at
any stage or you can transfer them into another employer pension scheme, if you
join one at a later date.
If you die before drawing on the Buy Out Bond, the value of the funds in your Buy
Out Bond at that stage will be paid to your estate, for the benefit of your next of kin.
I’ve moved jobs a couple of times over the years, how do I keep track of my pensions?
As you move jobs you may start to accumulate small pension benefits in different
employer pension schemes. When you leave a job you will have to decide what
to do with the pension benefits you may have built up in your former employer’s
pension scheme.There are three basic options:
- You can leave the benefits to grow in that scheme until you retire. This option
can throw up a challenge when it comes to your retirement as you may have
to go back and try and contact these former employers to gain access to your
- You can transfer your benefits to your new employer’s pension scheme, if you will be joining such a scheme. You will get these benefits when you retire from
your new employer.
- You can transfer your benefits to a Buy Out Bond (also called a Personal
Retirement Bond). A series of Buy Out Bonds in your name can become the
hub for all the pension benefits you may have built up over the years at your
Where you hold a pension in a former employer’s defined benefit pension scheme,
there are a number of factors to consider before making a decision to transfer your
funds to a new employer’s scheme or to a Buy Out Bond.
My former employer is winding up its defined benefit pension scheme.
What are my options?
If your former employer winds up its defined benefit pension scheme, you have
• You can transfer your benefits to your current employer’s pension scheme, if
you are a member of such a scheme.
• You can transfer your benefits to a Buy Out Bond, which you can take out in
your own name with a life insurance company.
• You can transfer your benefits to a PRSA provided you have less than 15 years
service in that pension scheme.
Remember: If you fail to make a decision, the trustees of your former employer’s
pension scheme will transfer your benefits to a Buy Out Bond of their choosing, for
How do I decide where to invest my Buy Out Bond?
You may be relying on your Buy Out Bond to provide an important source of
income in retirement, so it’s vital that you invest it wisely. There are many options
available to you, from low and high risk funds investing in particular types of assets,
to managed or mixed funds investing in a spread of assets and self-directed funds
where you choose the funds or assets in which you invest.
The funds you decide to invest in should offer you a diversified range of investment
options that can meet your changing circumstances over time.
Any choice you make should be based on the level of investment risk you are
comfortable with and should take into account your financial circumstances and
goals. It is important to understand that the value of your Buy Out Bond can fall as
well as rise, depending on which funds or assets you invest in.
|Warning: The value of your investment may go down as well as up.|
|Warning: Past performance is not a reliable guide to future performance.|
|Warning: This product may be affected by changes in currency exchange rates.|
|Warning: If you invest in this product you may lose some or all of your money.|