Cornmarket Public Sector AVCs - 1.5% AMC

D

dublin67

Registered User
Messages
388
For anyone who has taken out Irish Life public sector AVCs (e.g. HSE/Gardai), perhaps through Cornmarket or Irish Life directly, they should take a look to see if they have signed up to a Consensus Individual Retirement Strategy. This "strategy" moves the AVC into a Capital Protection Fund as one gets nearer to retirement. The Capital Protection Fund would have a very high level of bonds to reduce volatility presumably. For individuals in the public sector the requirement for such risk reduction is not clear to me given the guaranteed nature of the public sector pension.

The benefit to Cornmarket is that an annual management fee of 1.5% is levied to the Capital Protection Fund where most of the other funds seem to charge 1%. Irish Life charge 1% fee on this fund and Cornmarket charge an additional 0.5%. My spouse has just moved her fund into the Consensus Fund which charges 1% AMC.

I'd therefore suggest that individuals with Cornmarket AVCs look at this point is they are near retirement. It is likely that such a decision to move into this Consensus Individual Retirement Strategy was made when the AVC was purchased many years ago. On a side issue my spouse stopped paying AVCs many years ago and bought back years for her training time. Much better value for money and no fees to reduce fund performance (as db scheme obviously).
 
Thanks Dublin67 good point raised. I have found it extremely difficult to find info on buying back years. I wonder is it better value for Single Scheme members too?
 
Sunnygirl69 said:
I have found it extremely difficult to find info on buying back years.
Click to expand...

Ask for the quote on cost from the main scheme administrators. It may take some time to get it. You could set up a PRSA AVC while you're waiting, if time is an issue. You can always stop paying it.

When you get the quote you might need someone to analyse it and compare it to what a PRSA AVC would buy you for the same level of contribution. If the PRSA AVC has a 5% contribution charge and/or a 1.5% AMC then my best guess is that added years would win if the assumed gross growth rate was circa 6% on the PRSA fund. Removing both 5% contribution charge and the additional 0.5% AMC is the equivalent of a total annual cost saving of circa 1% pa (over 20 years) and I'd say it's a toss up between the two as to which might be 'better'.

If you want to buy certainty then buying back years is probably the way to go.

If you want flexibility, are not risk averse and control charges, then the outcome is probably different. You might also hit a period at normal retirement age when annuity rates are good so you could always buy certainty at that time.

This is a very generic post. Until such time as someone would actually see the cost of buying back the added years and then do an analysis it would be very difficult to establish if either is better value.


Gerard

www.prsa.ie
 
Last edited:
GSheehy said:
Ask for the quote on cost from the main scheme administrators. It may take some time to get it. You could set up a PRSA AVC while you're waiting, if time is an issue. You can always stop paying it.

When you get the quote you might need someone to analyse it and compare it to what a PRSA AVC would buy you for the same level of contribution. If the PRSA AVC has a 5% contribution charge and/or a 1.5% AMC then my best guess is that added years would win if the assumed gross growth rate was circa 6% on the PRSA fund. Removing both 5% contribution charge and the additional 0.5% AMC is the equivalent of a total annual cost saving of circa 1% pa (over 20 years) and I'd say it's a toss up between the two as to which might be 'better'.

If you want to buy certainty then buying back years is probably the way to go.

If you want flexibility, are not risk averse and control charges, then the outcome is probably different. You might also hit a period at normal retirement age when annuity rates are good so you could always buy certainty at that time.

This is a very generic post. Until such time as someone would actually see the cost of buying back the added years and then do an analysis it would be very difficult to establish if either is better value.


Gerard

www.prsa.ie
Click to expand...
Superannuation Handbook Non-Established (prod-cs-pensions-assets.s3.amazonaws.com)

See Table 1 around page 86 for the rates to purchase notional service.

Some other very useful information in this documment.
 
I always chuckle when I read these threads. The public sector unions’ raison d’etre seems to be driving a hard bargain with the likes of government. Yet they endorse Cornmarket’s ludicrously high fees and the complete spoof that their products are the only ones which can deliver the benefit of regular tax relief through payroll.

An AMC of 1.5% is ridiculous, contribution charges are ridiculous, end of story, and you can code any regular pension contrubution to any pension product into your Tax Credit Cert and get the benefit of it through salary.
 
Gordon Gekko said:
Yet they endorse Cornmarket’s ludicrously high fees and the complete spoof that their products are the only ones which can deliver the benefit of regular tax relief through payroll.
Click to expand...
100%.

Some PS employers even host brochures for Cornmarket products on their intranet presumably at the behest of the unions.

Naive staff will assume it’s endorsed or even the only option for them.
 
This is the best I can do with providing an example. I've no experience in the workings of added years and purchase of notional service so apologies if I'm simplifying it or have misinterpreted.

Scroll to page 30 on this where it says that it would cost Lisa (she's 51 next birthday) €22,750 to purchase €1,000 of pension at 68 - €22,750 / 18 / 12 = €105.23 pm gross.

(The actuarial rates to different retirement dates are on the previous pages)

€105.23 pm (level) into an AVC PRSA for 18 years with an assumed growth rate of 4.6% pa and a 1% AMC would generate a fund of €31,897.69

€105.23 pm (level) into an AVC PRSA for 18 years with an assumed growth rate of 4.6% pa and a 1.5% AMC + 5% Contribution Charge would generate a fund of €28,828.76

A 68 year old (today) with a fund of €31,897.69 could buy an annuity (100% dependents with 3% escalation) of €94.67 pm

A 68 year old (today) with a fund of €28,828.76 could buy an annuity (100% dependents with 3% escalation) of €85.56 pm

There are anomalies in the comparison. Like, I'm not sure what the escalation rate is on the main scheme. The growth rate might be more, or less. We've no idea what annuity rates will be in 18 years time IFF you want to buy one of those and not an ARF.

Behind the added years costing in an actuary (or actuaries) and I doubt very much that they were tasked with pricing this method so as to give the employee a significant advantage over the AVC route.


Gerard

www.prsa.ie
 
Last edited:
Dr Strangelove said:
100%.

Some PS employers even host brochures for Cornmarket products on their intranet presumably at the behest of the unions.

Naive staff will assume it’s endorsed or even the only option for them.
Click to expand...
For primary teachers at least, Cornmarket is the only option for salary deduction to AVCs. Any other option means claiming tax back for themselves and many are reluctant or wary of Revenue (unnecessarily I must add as I've always found Revenue are most helpful).
 
Protocol said:
It's simple to claim tax back on pension conts.

I worry about our education system if teachers can't do this.
Click to expand...

Agree it's very easy but it is amazing that many people (including teachers, engineers, solicitors, bankers that I know) are reluctant to seize control of their own tax and pension affairs until it's very late.
 
dublin67 said:
For individuals in the public sector the requirement for such risk reduction is not clear to me given the guaranteed nature of the public sector pension.
Click to expand...
Horse for courses maybe? Although I have a public sector pension my plans to retire early demand that I have savings to bridge the gap to State pension. My AVC is low risk as I want to be fairly sure that it will bridge that gap, which it will if it just bobs along.
 
just on this is there way of forcing any governmental department to do deductions at source for any other reasonably priced scheme other than this complete rip off - I think my wife was loosing 4.5% on placement and 1.5 % on amc on her avcs absolutely scandalous stuff
 
Last edited:
Whoever is 'selling' the notion that it's much easier / convenient / hassle free to set up an AVC with very high costs to public servants via salary deduction, is doing a really good job.

It's one extra step, uploading a PRSA2 Certificate via My Account, to adjust tax credits and you then see the change in your pay-slip, on a competitive priced product.
 
pats22b said:
just on this is there way of forcing any governmental department to do deductions at source for any other reasonably priced scheme other than this complete rip off - I think my wife was loosing 4.5% on placement and 1.5 % on amc on her avcs absolutely scandalous stuff
Click to expand...

Vote with your feet, and set up an alternative AVC.
 
pats22b said:
just on this is there way of forcing any governmental department to do deductions at source for any other reasonably priced scheme other than this complete rip off - I think my wife was loosing 4.5% on placement and 1.5 % on amc on her avcs absolutely scandalous stuff
Click to expand...

One can't generally "force" one's employer to do things that it doesn't want to do! The best approach might be to ask them politely. But they'll probably refuse, equally politely!

So the next step would be to bring a motion to one's Union AGM which, if carried, would go forward for consideration to the Union's Annual Delegate Conference. That would be an interesting thing to have debated at the ADC, bearing in mind that while PS Union Head Offices appear to be quite happy with the present situation, many of their better informed members are definitely not!
 
Last edited:
You must log in or register to reply here.
Back
Top