Options for a Defined Benefit & Defined Contribution Scheme from the same employment

Here's a situation that's more common than you'd think: you've worked for the same employer for years, and you've ended up with both a Defined Benefit (DB) pension and a Defined Contribution (DC) pension from that same employment. Maybe the company closed its DB scheme and moved everyone into a DC arrangement. Maybe you're a member of both simultaneously. Either way, you're now approaching retirement — or leaving — and you need to understand your options.

It's genuinely confusing. The two types of pension scheme work in fundamentally different ways, with different rules for access, different tax treatment at retirement, and different risks. Making a decision about one can directly affect the other. Getting this wrong can cost you tens of thousands of euros or lock you out of options you didn't know you had.

Key takeaways:

• DB and DC pensions are fundamentally different — one guarantees an income, the other depends on investment growth
• Having both from the same employer creates unique planning opportunities, particularly around access timing and lump sum optimisation
• Transferring a DC pension to a Personal Retirement Bond (PRB) can unlock earlier access from age 50
• Taking a Cash Equivalent Transfer Value (CETV) from a DB scheme is a major, irreversible decision that requires careful analysis
• Professional financial advice is essential before making any transfer or retirement decision involving both schemes

What's the Difference Between a Defined Benefit and a Defined Contribution Pension?

Before exploring your options, it's worth understanding what makes these two pension types so different.

Feature	Defined Benefit (DB)	Defined Contribution (DC)
What you get at retirement	A guaranteed income based on salary and years of service	Whatever your pension fund is worth — depends on contributions and investment growth
Who bears the investment risk?	The employer/scheme trustees	You — your pension pot rises and falls with markets
Funding	Employer guarantees the benefit; both employer and employee contribute	Employee and employer contribute a fixed amount; no guaranteed outcome
Typical retirement age	Scheme's normal retirement age (often 65)	Scheme rules — often 65, but may allow earlier access
Portability	Can take a CETV if leaving before retirement	Can transfer your pension fund to a PRB or new employer's scheme
Inflation protection	Some schemes index-link pensions; many don't	Depends on investment returns — no automatic protection

A DB pension is essentially a promise: "We'll pay you X per year for life when you retire." A DC pension is a pot of money: "Here's what you've accumulated — it's yours to manage." Both have advantages. The challenge comes when you hold both and need to make coordinated decisions.

How Did You End Up with Both?

The most common scenario: your employer operated a DB scheme, closed it to new accrual (or to new members), and set up a DC arrangement going forward. You might have 15 years of DB benefits from the old scheme and 10 years of DC contributions in the new one. Or your employer might run both simultaneously — DB for core benefits and DC for additional voluntary contributions (AVCs).

Less commonly, you may have been offered the option to transfer from a DB to a DC scheme at some point, or you may have transferred into the current employer's scheme from a previous job's DB arrangement.

Whatever the route, the result is the same: two different pension types, two different sets of rules, and a set of retirement decisions that need to be considered together — not in isolation.

What Are Your Options at Retirement?

Option 1: Take Both Pensions at the Scheme's Normal Retirement Age

The simplest approach. You retire at the scheme's normal retirement age (typically 65) and take benefits from both pensions simultaneously.

From the DB scheme, you receive a guaranteed annual pension and typically a tax-free lump sum (often calculated as 3/80ths of final salary per year of service, or 1.5 times the annual pension).

From the DC scheme, you can take up to 25% of your fund as a tax-free lump sum (subject to the overall €200,000 tax-free lifetime limit). The remaining fund can be used to purchase an annuity or invested in an Approved Retirement Fund (ARF) for flexible drawdown.

The combined tax-free lump sum from both schemes is subject to the overall lifetime limit of €200,000 tax-free, with amounts between €200,000 and €500,000 taxed at 20%. Careful coordination between the two is essential to maximise the tax-free element.

Option 2: Take the DC Pension Early by Transferring to a Personal Retirement Bond

This is the option many people don't know about — and it can be a game-changer.

If you leave employment (or if the DC scheme allows it), you can transfer the value of your DC pension to a Personal Retirement Bond (PRB). A PRB is a pension in your own name, outside the employer's scheme. The key advantage? You can access a PRB from age 50 — potentially years earlier than the employer scheme's normal retirement age.

This means you could transfer your DC pension to a PRB, access it at 50 or any time thereafter, and leave your DB pension untouched until its normal retirement age. This gives you income flexibility in your 50s and early 60s while preserving the guaranteed DB income for later.

With a PRB, your retirement options are the same as a DC scheme: tax-free lump sum (up to 25%), then annuity or ARF for the balance. You also gain more control over your investments — you choose the funds, not the scheme trustees.

Option 3: Take a Cash Equivalent Transfer Value (CETV) from the DB Scheme

This is the big decision — and it's irreversible. A CETV is the lump sum the DB scheme will offer you in exchange for giving up your guaranteed pension. You transfer that value into a PRB or another approved arrangement, and it becomes a DC-style pot that you manage yourself.

Potential Advantages of Taking a CETV	Potential Disadvantages of Taking a CETV
Greater control over your investments	You lose the guaranteed lifetime income
Flexibility on when and how you access your pension	Investment risk transfers entirely to you
Potential to pass remaining fund to beneficiaries (via ARF)	Longevity risk — you might outlive your money
Access from age 50 if transferred to a PRB	The CETV offer may not reflect the true value of the DB benefit
May be attractive if scheme funding is uncertain	Decision is irreversible — you cannot go back

Taking a CETV can make sense in specific circumstances: if the scheme is poorly funded and you're concerned about its long-term viability, if you have no dependants who would benefit from a survivor's pension, if you're in poor health and unlikely to draw the pension for decades, or if the transfer value is exceptionally generous relative to the benefit.

But for most people, the guaranteed income from a DB scheme is enormously valuable — particularly in an era of rising life expectancy and market uncertainty. You should never take a CETV without independent financial advice from a qualified financial advisor who is regulated by the Central Bank of Ireland.

Option 4: Defer Your DB Pension and Take DC Benefits First

If you leave employment before the scheme's retirement age, you can often defer your DB pension — leaving it in the scheme to be drawn at the normal retirement age (or earlier, if scheme rules allow). Meanwhile, you transfer your DC pension to a PRB and access it when you need it.

This is a particularly useful strategy if you want to retire early but need income to bridge the gap before the DB pension and State Pension (age 66) kick in. The DC fund provides flexible income in the early years; the DB pension provides guaranteed income later.

Tax-Free Lump Sum Planning Across Both Schemes

This is where coordinated planning really pays off. The overall lifetime tax-free limit is €200,000 across all pension sources. If your DB scheme provides a lump sum of €150,000 and your DC fund is €300,000 (of which 25% = €75,000 would be tax-free), the combined €225,000 exceeds the limit — meaning €25,000 would be taxed at 20%.

Sequencing matters. Understanding the exact calculations for each scheme — and the interaction between them — can optimise the tax-free element and reduce your overall tax bill at retirement. This is detailed, technical work that requires advice before making any decisions.

Key Questions to Ask Before Making a Decision

• What is the normal retirement age for each scheme, and can I access benefits earlier?
• What tax-free lump sum will I receive from the DB scheme, and how does it interact with my DC benefits?
• Is the DB scheme well-funded? What's the scheme's funding level?
• What CETV is being offered, and how does it compare to the value of the guaranteed pension?
• Do I have a spouse or dependants who would benefit from DB survivor benefits?
• What are my health considerations? Am I likely to draw this pension for 20+ years?
• Can I transfer the DC element to a PRB for earlier and more flexible access?

Frequently Asked Questions

Can I transfer my DB pension to a PRSA?

Generally, no. Transfers from DB schemes to Personal Retirement Savings Accounts (PRSAs) are restricted under Irish legislation. You can transfer to a PRB (Personal Retirement Bond) or, in some cases, to a new employer's occupational pension scheme. Seek advice before making any transfer decision.

What happens to my DB pension if the scheme winds up?

If a DB scheme winds up with insufficient assets, benefits may be reduced. The Pensions Authority oversees scheme wind-ups and the priority order for distributing assets. Active members and deferred members may receive less than their full entitlement. This is one scenario where taking a CETV before wind-up — if offered at a fair value — might be worth considering.

Should I take my DB pension early at a reduced rate or wait for the full amount?

It depends on your circumstances. An early retirement reduction (typically 3–6% per year before normal retirement age) means a lower pension for life. But if you need income now and have no other source, or if your health is a concern, the reduced pension may be preferable. Cash flow modelling can show the long-term impact of both options.

Do I need financial advice for this?

Yes — strongly recommended. The interaction between DB and DC pensions, transfer values, tax-free lump sum limits, and retirement access rules is complex. Making decisions about one scheme without understanding the impact on the other can be costly and irreversible. A qualified financial advisor regulated by the Central Bank of Ireland can help you see the full picture and make the right choice for your retirement goals.

Your Next Steps

If you hold both a DB and DC pension from the same employer — or from any previous employment — the most important thing you can do is understand your options before making any decisions.

• Request up-to-date benefit statements for both schemes
• Ask for a CETV quotation from the DB scheme (even if you're not sure you want to transfer — it's useful to know the number)
• Check whether your DC scheme allows transfers to a PRB — and understand the access rules
• Talk to an independent financial advisor before making any irreversible decisions

Want to understand your pension options clearly? Book a pension review with one of our CERTIFIED FINANCIAL PLANNER™ professionals. We'll analyse both schemes, model your retirement income under different scenarios, and help you make the decision that's right for your situation.