If you are nearing your retirement age or have been invested in your defined benefit pension plan for quite some time, this article will help tackle a key question that most of us wonder about but rarely ask aloud.
Should an enhanced transfer value be considered an option, and if so, how could that be beneficial.
4 Prime Benefits Of Enhanced Transfer Value In Ireland
1. Greater financial freedom
By opting for an enhanced value transfer scheme, an individual is essentially gaining access to funds in the short run by limiting or changing the variables of their defined benefit pension plan.
In most cases, however, an enhanced transfer value is paid when you transfer your pension plan from a defined benefit pension plan to a defined contribution pension plan or any other such plan.
With the funds in your account, you gain greater financial freedom, which enables you to realize the dreams that had been put on hold all this while.
It is definitely a good thing to know how much you stand to gain but it’s as important to know what’s the best time to take advantage of it. For that, you’d need to know for how long you intend on working and the age at which public benefits kick in so as to plan comfortably
To understand the government’s stance on retirement, read their press release. It will help understand how the public financial expenditure would affect your retirement plan.
2. Enjoy double benefits
Now that we know how ETVs function, let’s understand how it enables you to earn returns on your pension policy by changing it or transferring it to another pension plan.
If you have created a defined benefit pension plan and diligently paid towards it for the past years, you are bound to have a healthy amount saved up. Your financial advisor will calculate your transfer value based on your contribution pool and expected pool, along with many other variables.
The ETV will represent a percentage of that total pool that would have been due to you. This percentage will be paid upon the successful transfer of the account to a new plan.
This new plan will be more or less close to your previous plan and can be expected to give the same returns. This is because you reap the benefits of your defined benefits plan by gaining the enhanced value transfer and end up getting paid from the new pension plan when you retire.
3. ETVs to benefit those who are nearing retirement
Most salaried employees have some form of a retirement policy which is why Ireland’s leading financial advisors have begun advising those with an existing policy to consider the benefits of transfer. Enhanced Transfer Value Ireland has favorable transfer rates, and that has raised hype about these transfer benefits.
We hope to get you beyond the hype so that you can better understand at which stage it would be most beneficial for you to consider a switch from your pension plan.
Alternatively, you’ll also get the clarity to know whether or not to stay on your current plan. Again, a foundation in rational thought will help you feel more reassured about your decision.
The value of the ETV increases as you near retirement or the maturation point of the policy. While the value will be the greatest at that stage, shifting at that point might not make sense. So, to overcome this challenge, you need to cross the halfway mark of your current plan before considering a switch.
The logic is that the greater time you have spent on your current policy will dictate the transfer rate. So the only thing you need to consider is if there exists a policy that would give you similar returns in the remaining period of time.
4. How to calculate your ETV
The key things that need to be kept in mind include the age at which you begin drawing your pension and the target amount you set. Based on this, you can calculate your enhanced transfer value.
The main factors which need to be kept in mind include knowing the total policy duration and the period that has been covered. This is the best place to start as it gives you greater clarity in terms of time, and from there, you can pick a window that reflects the best opportunity to switch.
Initially, everything can seem complex and intimidating, which is why I hope you have gained a greater insight into this option and how it could benefit you through this article. In addition, this should enable you to ask your financial advisor key questions.
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