About to take out a PRSA and worried!

S

suzywong

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Hi,

I am 44 and only have 11 years worth of public service pension contributions paid. I intend to work till I'm 60 (giving me a maximum possible total of 27 years pension contributions at retirement). I have 1.5 years of temporary service in the same job before being made permanent but did not contribute to the pension scheme during that time.

A financial advisor (invited by my employer) told me that the best way to improve my situation is to take out a PRSA, and is currently drawing up the paperwork. (He said that to buy back the year and a half of temporary service would cost 25K, which is out of the question). After tax, the PRSA will cost me 230 per month, and lead to a lump sum of about 100K.

The problem is that I have looked through lots of posts on this forum and am getting more and more confused about the pros and cons of different options! What I really want to know is that I'm not making a huge mistake! Any advice (even just to say PRSA are not dangerous or irrevocable commitments) would be appreciated. Can you actually opt out of these things if you decide you want to at a later stage?

Thanks in advance,
Suzy.
 
Unless you have very spefic requirements regarding what sort of fund you want your PRSA to invest in, make sure that you're sold a Standard PRSA and not a Non-Standard PRSA. The former has capped charges - maximum 5% of each contribution and 1% of the fund per year. The latter has no cap on charges.

The cost of buying back years does seem steep, but there are many variables involved in this calculation. Do you have this €25,000 figure in writing from your employer? If not, get it. I'm probably being over-cautious here but just want to eliminate the possibility that the financial advisor would deliberately quote you an exorbitant figure for buying back years in order to steer you in the direction of the PRSA instead. Mind you, no honest or ethical financial advisor would do such a thing so I'm sure the €25,000 figure must be accurate.

A PRSA is certainly not dangerous - it's a tax efficient way of savings money. Nor is it irrevocable. You can decrease / stop / increase / skip your contributions at any time without cost or penalty.
 
Thanks so much for that LDFerguson. Big sigh of relief! Will check cost of purchasing with employer also.
 
I'm presuming the PRSA being recommended to Suzywong is an AVC PRSA, which is available to all Public Servants.
 
LDFerguson said:
...
The cost of buying back years does seem steep, but there are many variables involved in this calculation. Do you have this €25,000 figure in writing from your employer? If not, get it. ...
Click to expand...

I think that would be step one. Please post back as its something I'd like to pursue myself.
 
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