Default Investment Strategy

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Kevin198823

Registered User
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Hi,

I am mid thirties looking at PRSA with Royal London Ireland as it has the lowest fees. I am aware that I have to go through a broker but I do not want to spend additional money on the broker actively managing the funds. I was thinking about going with the Royal London Default Investment Strategy which offers a diversified portfolio with an asset allocation that adjusts over time, reducing the risk as I approach retirement age.

Can anybody offer advice on whether this is a good idea? Thanks.
 
You don't need your broker to "manage" things for you. You can make changes to the asset/fund allocation/find switches yourself by just telling your broker what you want and they will pass the instructions in to the pension provider. Many people would suggest just sticking it in a high equity option (e.g. MSCI World Index tracker or a similar high/all equity managed fund) and forgetting about it. Some would also question the wisdom of lifestyling at all unless the plan is to buy an annuity rather than rolling over to a vested PRSA or ARF at retirement. But that may also depend on the overall circumstances of the individual. Others may believe that lifestyling is a prudent approach for some or even many individuals.

E.g. I'm late 50s, effectively early retired, drawing a small amount from my PRSA (chipping a year or two of expenses into a separate smaller PRSA contract then drawing the tax free lump sum and ongoing income from that while leaving the bulk of my pensions alone), but still have practically all of my pensions in MSCI World Index trackers or equivalent (mainly with RLI as it happens). But what's appropriate for others may differ and depend on their appetite for risk/volatility and ability to ride volatility out - and my capacity for both of these is high.

Some other threads that may be of interest...

Key Post - Does an ARF negate the need to lifestyle your pension plan?

From the research I’ve done so far the prevailing wisdom in regards to pension plans is to lifestyle them by reducing your exposure to equities as you get closer to retirement. However if your plan is to move those funds into an ARF upon retirement does that negate this need? Except for...
www.askaboutmoney.com

A critique of the lifestyling approach to pensions

I came across a paper which may help the PA answer some of those questions: "Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice" https://www.netspar.nl/assets/uploads/19.-Cederburg-ACO_Manuscript.pdf "Our findings suggest that financial advice and pension regulations...
www.askaboutmoney.com
I presume that you've probably seen this thread already.

Probably the best (cheapest) PRSA in the world?

The launch of Royal London Ireland's new pension product in late November 2024 seems to have finally offered customers accessible, lost-cost PRSAs. Through an execution-only broker, it is relatively easy to access a passive fund AMC of 0.55% or significantly lower on larger transfers. Taking...
www.askaboutmoney.com
Note that depending on the regular or lump sum/transfer amounts involved you may be able to get better value/lower charges with the likes of Standard Life. There are lots of existing threads discussing the options.
 
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Kevin198823 said:
I do not want to spend additional money on the broker actively managing the funds
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The broker can't actively manage the funds.

Kevin198823 said:
I was thinking about going with the Royal London Default Investment Strategy
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All PRSAs must have a default investment strategy. They're a one size fits all approach, so it may or may not suit you (more likely to not suit you).
 
Fortune said:
Easier to just go directly to the pension provider, unless you want/need to run it by the broker first.
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As far as I know not all providers will deal with the policyholder directly?
But, where they do, then, yes, going direct is simpler.
 
I've had to go through a broker for Royal London. The fees that came back are Annual Management Charge of 0.70% (8 Passive Funds) or 0.75% (Actively Managed Funds).

Would I be correct in thinking that if I paid the 0.05 for the Actively Managed Fund, I would not have to do anything and they would continously allocate the funds?
 
Kevin198823 said:
Would I be correct in thinking that if I paid the 0.05 for the Actively Managed Fund, I would not have to do anything and they would continously allocate the funds?
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That would happen for either option. A passive fund attempts to replicate the returns of the market. An active fund attempts to beat the market returns.
 
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