Pensions - Buy Out Bonds
Why take out a pension ?
What is a Buy Out Bond ?
A Buy Out Bond is a pension bond into which you can transfer your fund if you leave your company pension sheme.
- How is my Buy Out Bond set up ?
- Who chooses the Buy Out Bond ?
- Can the trustees transfer my fund to a Buy Out Bond without my consent ?
- What are the advantages of a Buy Out Bond ?
- What are the disadvantages of a Buy Out Bond ?
- Can I take my money out if I need it in the future ?
- Can I provide extra protection for my family ?
- Can I put more money into my Buy Out Bond later ?
When do I have to decide if I want a Buy Out Bond?
You have up to two years after you leave a company pension to transfer your fund to Buy Out Bond. Outside of the two year period you can still transfer to a Buy Out Bond if the trustees agree.
How is my Buy Out Bond set up ?
The bond is actually set up by the trustees of your company pension. They apply for the bond in your name but once it is set up it belongs to you and the trustees have no further involvement in it.
Who chooses the Buy Out Bond ?
You do. Even though the trustees have to sign the application form,you can generally choose any Buy Out Bond you like.
Can the trustees transfer my fund to a Buy Out Bond without my consent ?
Yes, but only under certain circumstances:
- If a company pension scheme is being wound up.
- If the transfer value of your fund is less than an amount set by the pension act.
- In any other cases where approval is given by the pensions board.
When you leave a company pension you have three choices as to how you use any pension fund to which you are entitled. You can:
- Leave it invested in your company pension until you retire.
- Transfer it to the company pension of your new employer.
- Transfer it to a Buy Out Bond in your name.
What are the advantages of a Buy Out Bond ?
- The policy is issued in your name.
- You can choose when you take your benefits.
- You choose the fund in which your money is invested.
What are the disadvantages of a Buy Out Bond ?
- Since you choose the investment funds, you also carry the investment risk.
- You may lose out on benefits improvements.
- You may lose out on extra benefits.
Can I take my money out if I need it in the future ?
No. Once you have put money into any pension plan you cannot withdraw it until you reach retirement.
Can I provide extra protection for my family ?
Buy Out Bonds do not have the option of providing extra protection benefits.
Can I put more money into my Buy Out Bond later ?
The only money you might be able to add to your Buy Out Bond later is another transfer value from a company pension with the same normal retirement age as the previous transfer.