ARF Distribution and PAYE Process.

[LDFerguson]

Agree it would be difficult Liam, but if we were to limit the Key Post to Passively Managed Global World Equity funds for 70-75%% of the fund and the balance in cash on an execution only basis (including Broker fees/commission) then at least everyone would have an idea of what is the "Best Buy" and could compare that against what they are offered to see if they see the value in paying a premium / trail for ongoing advise. Take €500K as the gross fund value.

Yes narrowing it down to a single example - €500,000 in a passively-managed global equity fund - would certainly make it possible. Off the top of my head, there would be big caveats - not all passively managed global equity funds are the same or even similar. Some track big indices like MSCI Global. Others track lesser-known indices. Then there's tracking error. But okay - so there would be caveats.

Bigger issue is that even brokers offering Execution Only services are free to decide on their own level of commission. So, for example, if I was to write the Key Post, it would include what my firm would charge. In effect the post would be an advertisement for my firm.

 

[Deauville]

Hi All

Can I please ask a question about a 'bucket strategy' / drawing from cash account in portfolio in order to mitigate sequence of return risk.

@Freelance - Does Zurich facilitate this or similar?

I would like to have as much control over draw down and re-balancing my portfolio when the time comes.

Does anyone have any recommendations on providers and whether costs to set up such a facility are prohibitive?

Thanks in advance.

LT

I've found from a bit of research that different providers offer different options and features. Not all offer the same features.
Examples of these would be

• Periodic automatic rebalancing of funds to help maintain volatility risk rating of the overall portfolio.
• Automatically making an increased distribution at year end to avoid a deemed distribution (paying tax on money you didn't get).
• Allowing client to choose a fund within the portfolio to draw from (allowing option of bucket strategy).

The providers don't seem to give much attention to competing with each other regarding facilitating clients.
To be honest, I think the brokers are seen as the real clients. That's not the brokers fault. They understandably are the source of clients.
The provider I'm leaning towards (Zurich) doesn't offer any of the above features Edit: Correction, they do appear to facilitate the third one but I would much prefer they offered some of them. It would make my plan much easier to carry out, especially as I get older and start dribbling.....more

As regards the bucket strategy, there's evidence that it may not give the best result compared to a portfolio (such as a 60/40) which is periodically re-balanced.
Part of the advantage of the later it seems is that when rebalancing you are potentially buying units which are lower priced at that time (selling high,buying low) within the portfolio.
The advantage of the bucket strategy it seems, lies in it's psychological effects. It makes us FEEL more secure,

Based on what I've learned (and the fact that the provider doesn't facilitate it anyway), I don't intend to use a bucket strategy.

If you can add to this as you gather information, I would be grateful.

 

[Freelance]

This is shaping up into a very interesting discussion.

Sadly, as always, once feees got mentioned, the discussion has been derailed. I think we can all agree that fees/costs/charges/commission are very very very very very very deliberately kept as clear as mud, especially the above the line costs and charges. Sadly, there is no chance of anybody here producing a fair and realistic cost comparison between product producers without a tremendous amount of effort.

It would be great if issue such as product efficacy, rules and restrictions, provider service levels etc could be discussed here and charges etc kept separate in it's own thread.

 

[fayf]

For the tax side, the ARF Provider, will give you what is effectively an Employer Number, and on Revenue My Account, you allocate your standard rate band and tax credits to this “employment”, or they may do this for you. The ARF drawdowns are not subject normally to PRSI for those over aged 65, but are subject to USC & PAYE.

As many people would
Also be in receipt of the State Contributory Pension at aged 66, (+ARF)many keep back enough tax credits and standard rate band, to satisfy the PAYE liability, due on the state Pension, and allocate the rest, to their ARF Pension Drawdowns, leaving a zero PAYE liability at the end of each tax year.

 

[S class]

ARFs are very useful for maximising the benefits of the 20% tax band. Effectively they are an employment where you can choose your level of income.

For a person with earnings below the 20% tax band the ARF drawdown can be adjusted to the exact maximum of 20% taxable earnings.

A person taking early retirement might have capacity for extra earnings at 20% before reaching state pension age.

After receiving their state pension they might enter the 40% tax band.

This person can benefit up to age 66 by making tax efficient ARF drawdowns.

 

[Freelance]

Zurich Pensions seems to be getting a few upvotes across several threads recently.

The providers don't seem to give much attention to competing with each other regarding facilitating clients.

Execution only brokers seem to use Zurich which is another plus for them.

Getting additional product or process information directly from the providers in general is like trying to get blood from a stone.

I find the service levels from Zurich poor, but this doesn't stand out as most of their competitors are similar. I've yet to meet an insurance/assurance company that excelled when it came to service levels.

I would not deal with Zurich without having a broker on and at my side under any circumstances. And I would not engage a broker on any basis other than fees for work done.

A few thoughts on my experience with Zurich:

Hi Zurich, here's a lot of money for my ARF. Can I have the "User guide" please. No sorry there isn't one, if you have any questions ask your broker. (I'm talking about simple stuff, when do I get paid, how am I notified, who do I contact with questions, how do I change personal details, what are the deadlines for making changes, the kind of handholding stuff you'd expect in a welcome pack)

Hi Zurich. Can you send my payslip by e-mail please. No sorry, we print the payslips on paper, put them into paper envelopes and post them to you in the very best 19th century tradition. Seriously. In 2024. And they arrive usually in the second week of the month following the month that they relate to.

Hi Zurich here is my new address. Oh Hi Zurich here is my new address that I advised you about three weeks ago, can you send my payslip to my new address please. Hello Zurich, this is my third time informing you of my new address, could you update your records please. Dear Zurich, I'd like to make a formal complaint.......

Annual reports, with a vague date such as "January 2023" generally arrive in March.

Hi Zurich, I'd like to....... Oh sorry, our system doesn't.........

Hi Zurich, could you provide a detailed movement report of my funds over the last 12 months, showing opening balance, price changes, encashments, charges, fees, deductions, other transactions, closing balance ? A what ??

Hi Zurich, great that you have an online repository for all documents and correspondence relating to my policy. Do you envisage moving beyond depositing approx 20 % of relevant documents in this at any point ?

On the plus side, I've been paid every month and the online policy information system is generally available.

In summary, the range of funds is probably the deciding factor.

 

[Freelance]

ARFs are very useful for maximising the benefits of the 20% tax band. Effectively they are an employment where you can choose your level of income.

For a person with earnings below the 20% tax band the ARF drawdown can be adjusted to the exact maximum of 20% taxable earnings.

A person taking early retirement might have capacity for extra earnings at 20% before reaching state pension age.

After receiving their state pension they might enter the 40% tax band.

This person can benefit up to age 66 by making tax efficient ARF drawdowns.

I'd endorse everything that @S class says about the efficacy and flexibility of ARFs as a product (aside altogether from specific providers). This applies particularly to anyone who wants to manage multiple income streams, maximise tax efficiency, cater for early retirement and other life/milestones.

 

[Freelance]

Zurich don't facilitate a 'bucket strategy' (choosing which fund to drawdown from) .......

Can I ask your source for this, it runs contrary to my understanding ?

Can any of the brokers who are on this offer a view ?

 

[Deauville]

I find the service levels from Zurich poor, but this doesn't stand out as most of their competitors are similar. I've yet to meet an insurance/assurance company that excelled when it came to service levels.

I would not deal with Zurich without having a broker on and at my side under any circumstances. And I would not engage a broker on any basis other than fees for work done.

A few thoughts on my experience with Zurich:

Hi Zurich, here's a lot of money for my ARF. Can I have the "User guide" please. No sorry there isn't one, if you have any questions ask your broker. (I'm talking about simple stuff, when do I get paid, how am I notified, who do I contact with questions, how do I change personal details, what are the deadlines for making changes, the kind of handholding stuff you'd expect in a welcome pack)

Hi Zurich. Can you send my payslip by e-mail please. No sorry, we print the payslips on paper, put them into paper envelopes and post them to you in the very best 19th century tradition. Seriously. In 2024. And they arrive usually in the second week of the month following the month that they relate to.

Hi Zurich here is my new address. Oh Hi Zurich here is my new address that I advised you about three weeks ago, can you send my payslip to my new address please. Hello Zurich, this is my third time informing you of my new address, could you update your records please. Dear Zurich, I'd like to make a formal complaint.......

Annual reports, with a vague date such as "January 2023" generally arrive in March.

Hi Zurich, I'd like to....... Oh sorry, our system doesn't.........

Hi Zurich, could you provide a detailed movement report of my funds over the last 12 months, showing opening balance, price changes, encashments, charges, fees, deductions, other transactions, closing balance ? A what ??

Hi Zurich, great that you have an online repository for all documents and correspondence relating to my policy. Do you envisage moving beyond depositing approx 20 % of relevant documents in this at any point ?

On the plus side, I've been paid every month and the online policy information system is generally available.

In summary, the range of funds is probably the deciding factor.

The last line is spot on for me too. I like the range of funds.

What info does the online policy information provide.
Can you see fund values and funds as percentage of portfolio ?
Can you make switches online or do you need to go through your broker ?

Thanks for your feed back.

 

[fayf]

ARFs are very useful for maximising the benefits of the 20% tax band. Effectively they are an employment where you can choose your level of income.

For a person with earnings below the 20% tax band the ARF drawdown can be adjusted to the exact maximum of 20% taxable earnings.

A person taking early retirement might have capacity for extra earnings at 20% before reaching state pension age.

After receiving their state pension they might enter the 40% tax band.

This person can benefit up to age 66 by making tax efficient ARF drawdowns.

There is an arguement for possibly taking more than you need in ARF Drawdowns, and lock away the excess in less risky/ risk free assets, IF, you have retirement years, before aged 66, which are within the 20% tax band.

Not to do so, may mean, that slice of ARF Income is liable to 40% PAYE, just a few years later, it is a delicate balancing act as conversely, you maybe loosing out on tax free ARF fund growth, potentially.

The standard rate band has grown by 19% in the last 4 years to 42k per person in 2024, albeit in a high inflation period, and the current trend is it will continue to increase modestly.

If a couple, thats 84k available at standard rate between them, and if one spouse has a higher pension than the other one has options for 51k at the standard rate for the higher person’s pension drawdown, and 33k for the lower pension drawdown. Bearing in mind the max state contributory pension is circa 14k per person, at the moment.

Theres a lot of flexibility with an ARF, the person has total control over the fund release, and can plan around tax efficiency particularly in any retirement years, before reaching aged 66.

 

[Deauville]

Can I ask your source for this, it runs contrary to my understanding ?

Can any of the brokers who are on this offer a view ?

I'm pretty sure I got it from someone who had dealings with them.
I'll check.

 

[Fortune]

The last line is spot on for me too. I like the range of funds.

What info does the online policy information provide.
Can you see fund values and funds as percentage of portfolio ?
Can you make switches online or do you need to go through your broker ?

Thanks for your feed back.

What are the Zurich funds that everyone is liking?

 

[Freelance]

What info does the online policy information provide.
Can you see fund values and funds as percentage of portfolio ?
Can you make switches online or do you need to go through your broker ?

For each policy there are the following tabs:
Details: Fixed Details: Owner, premium, retirement age/date, broker name
Benefits: Blank
Values: Current Fund Value, Current Transfer Value, Valuation Date
Premium: Premium History details broken out by contribution (last 24)
Funds: For each fund: FUND DESCRIPTION, I/A, FACT SHEET, CHART, AMC %, UNITS, FUND VALUE, plus the overall total. No unit price.
Exit Tax: Blank
Encashments: For each: EFFECTIVE DATE, DESCRIPTION, AMOUNT
Correspondence: Some standard documents deposited here, far from complete
Client: Client Fixed Details: Address, Phone, email, DOB, PPSN

So basic client and policy stuff, including current units and values. Nothing sophisticated or fancy (i.e. no modelling, what-if, projections etc) If you are familiar with say Customer Sales Systems and the like it's pretty much 1990s vintage. So par for the course in financial services.

You also have the option to create a Policy snapshot in PDF format, which I find useful to save to local storage, to allow tracking etc. If you don't do this you only ever have a current point in time view, nothing historic.

Can you see fund values and funds as percentage of portfolio ?

No, but you have total value for each fund and overall total, so you can to copy and paste to excel.

Can you make switches online or do you need to go through your broker ?

Ah now here....... No, you can't do anything like that. There are no input or update capabilities whatsoever. No buttons to update/correct fixed details, model or conduct switches, analyse etc. It is strictly View Only.

 

[Deauville]

Can I ask your source for this, it runs contrary to my understanding ?

Can any of the brokers who are on this offer a view ?

 

[Deauville]

I stand corrected. I found this in their ‘Why choose Zurich for your ARF’ booklet.
There was no mention of it in their guide.

 

[Deauville]

What are the Zurich funds that everyone is liking?

These are the ones I’m using to build an ARF portfolio for myself.
They currently have low or nil other ongoing costs, no additional AMC and provide for decent diversification.
This sample portfolio has a 5 year volatility of 10.68 with a ESMA risk rating of 5.

 

[S class]

With Zurich, I set up the 4% monthly drawdowns.

These can be suspended and restarted for any period in the year. The overall yearly amount of 4% remains the same. So after suspension and restart the remaining drawdowns to year end are larger. The drawdowns for the next year revert to the normal 4% yearly amount per month.

Zurich don't charge for this type of activity

If you decide near year's end to drawdown an extra lump sum, Zurich will charge a 20 euro fee.

All these adjustments can be made by emailing a scanned signed letter of instructions to Zurich.

 

[Deauville]

With Zurich, I set up the 4% monthly drawdowns.

These can be suspended and restarted for any period in the year. The overall yearly amount of 4% remains the same. So after suspension and restart the remaining drawdowns to year end are larger. The drawdowns for the next year revert to the normal 4% yearly amount per month.

Zurich don't charge for this type of activity

If you decide near year's end to drawdown an extra lump sum, Zurich will charge a 20 euro fee.

All these adjustments can be made by emailing a scanned signed letter of instructions to Zurich.

Great to know this.
Learning a lot.
Thank you.

 

[Kev1964]

I had a Zurich PRSA which subsequently converted into a Zurich annuity and find the customer services team easy to contact either by phone or email. I come from a financial services background and have a low threshold for poor customer service. The level of competence I experience is satisfactory.

I am a bit dismayed with the paper based payslips though. And the online records are quite sparse but you probably don’t need much where an annuity is concerned. On balance it seems a happy enough experience compared with other experiences that I read about on here.

 

[Deauville]

With Zurich, I set up the 4% monthly drawdowns.

These can be suspended and restarted for any period in the year. The overall yearly amount of 4% remains the same. So after suspension and restart the remaining drawdowns to year end are larger. The drawdowns for the next year revert to the normal 4% yearly amount per month.

Zurich don't charge for this type of activity

If you decide near year's end to drawdown an extra lump sum, Zurich will charge a 20 euro fee.

All these adjustments can be made by emailing a scanned signed letter of instructions to Zurich.

Can you send that type of instruction directly to Zurich or must you go through your broker. Execution only or otherwise ?