Eddie Hobbs on tiktok strongly advising against the purchase of AVCs

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poorrelative

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Just wondering what peoples thoughts on Eddie Hobbs' recent spat of tiktok posts advising public sector works to avoid AVCs at all costs and instead purchase notional service.

Eddie Hobbs Counterpoint on TikTok

Eddie Hobbs Counterpoint's short video with ♬ original sound
www.tiktok.com www.tiktok.com

He suggests that those who have already contributed to AVCs and are within 10 years of retirement should consider disinvesting their AVCs by transferring into the public sector superannuation scheme. I never heard of this option before but it seems like it really is possible. My own calculations of the potential benefit of notional service over AVCs comes to the same conclusion as many here - that it is very expensive and you would need to live longer than the average life span to benefit from notional service.
 
Starts off saying that no PS worker should pay into AVC when they have the option of NSP as there is no stock market risk etc with NSP. He claims that most PS workers don't know about NSPs (which I find hard to believe) because 'no-one makes any commission from them'. He challenges PS workers to do the calculation and if they can't work it out then come to him or an actuary.... he says that in his 30 years of doing such calculations he hasn't once seen a break-even calculation in favour of AVCs. Then he goes on to mention the bit about transferring AVC to PS scheme - which is news to me. I know NSPs used to be much cheaper so perhaps he isn't aware that they are now much more expensive.
 
Not sure I agree with him. The new public sector pensions are the career average so not as favourable as they were in the past.

Secondly if your wage increases don't keep pace with inflation then in real terms uour pension entitlement decrease.

Thirdly you are not diversifying your retirement income. AVC are by and large invested in organisations certainly in your earlier years in profitable companies.

Fourthly you are earning a tax break on the way in and the way out (assuming your overall income keeps you below the high rate of tax).
 
The Pensions Authority cover Purchase of Notional Service (PNS) and AVCs and the pros and cons of each here.

https://www.pensionsauthority.ie/en/about_us/information/presentations/avcs%20and%20the%20public%20service.pptx
 
He claims that most PS workers don't know about NSPs (which I find hard to believe) because 'no-one makes any commission from them'.

Yes, there is some truth to this point.

PS might have a vague idea about NSP, but as it isn't actively promoted or marketed like AVCs
 
It would be a very useful Key Post. (I think I did one a long time ago but it would be out of date now.)

Some useful analysis here.

Civil Service - Notional Service & AVCs

Hi, I’m looking for some advice on purchasing notional service and in relation to AVCs. Age: 53 Pre 95 Civil Servant Service: will have 32.5 years service at age of 60. Member of spouses and children’s scheme. Current salary: €63K - at top of salary scale Plan to work full time from now until...
www.askaboutmoney.com

Eddie's advice was correct in most cases up to a few years ago. And that was at a time, when people went into Cornmarket and came out with AVCs.

I don't think it's universally correct any longer. It's a much tougher decision.
 
I agree with Eddie's points about there being no investment risk with NSP and also no commission, which causes a potential conflict of interest for anyone selling AVCs. But I also think that the advice that NSP is simply better is far too generalised.

An AVC can be used just to increase your tax free lump sum and not your taxable pension. NSP can't do this.

AVCs are often more suitable than NSP if you want to take early retirement.

Rather than believing the "AVCs bad; NSP good" TikTokery, I'd suggest that any public servant thinking of enhancing their pension should get a quote for the cost of NSP. Then ask their Financial Broker to compare the benefits of AVCs with NSP, having regard for their individual circumstances and requirements.
 
Brendan Burgess said:
Yes, but make sure that it's a fee based broker. A commission-based broker will often find the AVCs attractive.

Brendan
Click to expand...

There's undoubtedly a potential conflict of interest given that NSP pays no commission and AVCs do. You're not even allowed to pay a broker a flat fee in lieu of commission for setting up an AVC PRSA for you. All charges on PRSAs must be expressed as a percentage of the contribution or the fund. I suppose you can agree a fee with your broker of a percentage of the AVC PRSA contribution or fund.

But there's a practical issue. There are very few completely fee-based brokers in Ireland. Those that I know of are mostly targetting higher net worth people or companies and charging hefty fees. Not really suitable for a public servant earning, say €35,000 a year who can afford to put €150 per month into an AVC or NSP.
 
Brendan Burgess said:
It would be a very useful Key Post. (I think I did one a long time ago but it would be out of date now.)

Some useful analysis here.

Civil Service - Notional Service & AVCs

Hi, I’m looking for some advice on purchasing notional service and in relation to AVCs. Age: 53 Pre 95 Civil Servant Service: will have 32.5 years service at age of 60. Member of spouses and children’s scheme. Current salary: €63K - at top of salary scale Plan to work full time from now until...
www.askaboutmoney.com

Eddie's advice was correct in most cases up to a few years ago. And that was at a time, when people went into Cornmarket and came out with AVCs.

I don't think it's universally correct any longer. It's a much tougher decision.
Click to expand...
Can this be clarified by someone even in a general fashion?
These cases?
 
Agreed and the Cornmarket ones promoted by the unions generally have more expensive charges.

Also I have critical illness through a union and the critical illness product has a number of additional products bundled into it which increase the charges to the client.
 
It's a strange post.

Make an absolute claim and provide no evidence. There might be some merit in it but, 30 years of doing the figures and never coming across a case where a low-cost AVC might be a better fit is hard to believe.
 
GSheehy said:
It's a strange post.

Make an absolute claim and provide no evidence. There might be some merit in it but, 30 years of doing the figures and never coming across a case where a low-cost AVC might be a better fit is hard to believe.
Click to expand...
Forget about calling it strange. Whats the pros of going avc versus nsp?

From what i have read the pros of nsp are lower fees/commissions and no stock market risk.
 
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jim said:
Forget about calling it strange. Whats the pros of going avc versus nsp?
Click to expand...

It depends on what you want to achieve with your additional contributions. NSP will be better for some people's requirements; AVCs will be better for others. That's why I have a problem with Hobbs' black and white claim that one is better than the other in all circumstances. If he actually thinks that, he doesn't understand the examples of where AVCs are better than NSP.

I've already given just two examples above. There are others. https://www.askaboutmoney.com/threa...nst-the-purchase-of-avcs.232825/#post-1845068
 
AVCs could have an added advantage for public sector workers taking early retirement.
For pre 95 they can use an ARF to help them to qualify for a reduced state pension.
For post 95 they might be able to use an ARF to gain some extra state pension which will not be integrated into their public sector pension.
 
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