Carla Seely Column: Pension Plan Rollovers

May 23, 2022 | 0 Comments

Carla Seely Bermuda October 2018[Written by Carla Seely]

Rarely does an employee work for the same employer for fifty years. For most of us, we have worked for different organizations in a variety of different capacities during our working lives and, during our tenure at these various organizations, most of us have accumulated some pension funds along the way. However, many of us often forget to move [i.e., rollover] our pension funds from our old to our new organization when we switch employers.

A very common question we get asked in the pension department is, “What should I do with my defined contribution pension plan when I leave my company?”

Once you leave your employer, the options available for your pension will depend on your previous employer’s pension rules and, of course, legislation. A typical scenario for most pension members is a ninety-day execution window from the date you cease working to move the pension money out of the company’s pension plan and into an alternate pension vehicle.

Now, perhaps you’ve started a new job and you’re eligible to join your new employer’s pension plan ninety days after your hire date. If this is the case, then you can speak with your HR department to confirm that your new employer’s pension plan rules will allow you to rollover your pension funds. All you need to do is find out who the pension administrator is for your new employer and complete the necessary paperwork to execute the rollover. All the sources within your plan remain the same—locked-in will remain locked-in and voluntary will remain voluntary.

A key benefit of pension rollovers is that this allows you to keep all your pensions funds with a single provider. This means that you have one dedicated investment strategy for all of your accumulated pension money as opposed to having different pension accounts with different providers—perhaps with different investment strategies and while paying multiple sets of pensions administration feed. In addition, consolidating your pension funds can be a far more simplified approach as you ease your way toward retirement.

On the other hand, if you’re between jobs, you’ll need to make decisions regarding your pension funds; rolling your pension money over into an individual pension plan will be the best solution while on the job hunt. Again, nothing changes with the sources—locked-in will still remain locked-in and voluntary will still remain voluntary.

As each on-island pension provider has individual pension plans [e.g., at Freisenbruch-Meyer, we call our individual pension plan a Personal Retirement Plan, or PRP], it’s important to shop around to make sure you understand your individual pension plan options and what fees are associated with the individual plans. Once you’ve made your decision, your pension plan provider will guide you through the paperwork to rollover your pension funds into your new individual pension plan.

Something to also be aware of is that you can rollover your individual pension plan into your new employer’s plan—should your new employer’s pension plan rules allow for it—therefore, when you join your new organization it’s worth checking with the HR department to see what options are available.

At the end of the day, your pension plan may make up a significant portion of your retirement income. It’s essential that you manage it well by not just making sure your investments are meeting your retirement objective, but by also making sure you can locate where your pension funds are.

- Carla Seely is the Chief Operating Officer at Freisenbruch-Meyer, if you would like any further details please contact cseely@fmgroup.bm or call 441 297 8686.

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