Irish Pension Information

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A Defined Benefit Pension is a pension scheme that lets you know the amount you can expect to receive in retirement.

A Defined Benefit scheme or DB for short will tell you the amount you will receive weekly in retirement. They normally calculate this amount as a percentage of your final salary OR a percentage of your overall salary and your length of service. In other cases, the amount you receive could be a set fixed amount or an index.

If you are in a defined benefit scheme your contributions may be adjusted from time to time. This is to ensure the fund grows quickly enough to be able to provide the set benefit you expect to receive. Some schemes allow the employer to top up the fund if necessary.

Defined Benefit Pensions and State Pensions

It is very common for a DB scheme to take into account the amount you may be entitled to from your state pension. If your state pension is taken into account then your benefit would be calculated as follows.

Let’s say your defined benefit scheme offers you 50% of your final salary in retirement and you earn €1,000 a week. You now know that you will have a weekly income of €500 in retirement. However, if the state pension is €250.00 and you are entitled to receive this then your DB scheme will only provide €250 too.

This means in total you will receive €250 from the state and €250 from your pension giving you a total value of €500 per week. Schemes that take your state pension into account are known as Integrated Defined Benefit Schemes.

The calculation of your benefit amount is often done at retirement. So it may be the case that if the state pension increases you will have an income over €500. In most cases, the benefit is not reduced during your retirement.

Not all DB schemes are integrated. You could receive your full payment. So in the example above… if your DB scheme was not integrated then you would get €500 p/w from your DB Pension and €250 p/w from your state pension.

The Risks of Defined Benefit Pensions

There are risks with defined benefit pensions as your contributions are put in a fund. This fund also has to pay out all of the other employees. There have been cases where the fund has not had enough money to pay those in retirement. In these cases, the amount received may be lower than what you expect. This is because the fund simply cannot meet its obligations.

What to do next?

If you are interested in accessing a defined benefit pension there are a number of calculations that should be run to ensure you receive the maximum benefit. 

A Free Pension Access review will allow you to weigh up all your options and decide whether or not access is the right decision for you. There is no fee for this service.

The first step is checking whether or not access is possible. Check if you are eligible to access your pension. 

In some Defined Benefit schemes if the pension holder passes away half of the pension fund is taken away in an instant. Inheritability is an important consideration for those with family. You can get a full review of your pension free of charge with a free pension review

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