Group Pension Plan - Explanation of terms & advice on how competitive?

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apple1

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Hi,
Just about to enter a Defined Contribution Group Pension Plan and have been advised that the current Group Plan is through AIB. Would like some help to understand the following terms (charges).
"1. Unit Charge: There is a 5% difference between the Offer Price (at which units are allocated to Benefit Accounts) and the Bid Price (at which units are sold).

Are these charges "normal" or indeed competitive? There are other charges pertaining to the plan. These are: Fund Charge of 0.75% per annum deducted from the value of the investment fund & a monthly fee of €4.29.
Thanks, apple1
 
5% bid offer spread is not unusual - i.e. for each €1 that you contribute €0.95 is actually invested. Are you sure that there are no other per contribution charges such as allocation rates, commissions etc.? There should also be a monthly Pensions Board policy fee of c. €5 which will be charged whether or not you make contributions! (Sorry - just read your post and that's what the €4.29 is in all likelyhood). Fund management fee of 0.75% is not too bad. It's not the worst charging structure in the world. It would be nicer if the bid-offer spread was less or 0%. It's probably an acceptable charging structure especially if your employer matches contributions up to some level.
 
Thanks Clubman. My employer is matching my contribution up to a maximum of €4,000 per annum. In light of this, would you consider the charges reasonably competitive. Maybe this should be addressed to my employer, but am I restricted to joining this scheme if I want to avail of the contribution or have I the liberty to join another scheme? If so, is there a simple & quick way of comparing the charges for the various schemes? Thanks again.
 
apple1 said:
Thanks Clubman. My employer is matching my contribution up to a maximum of €4,000 per annum. In light of this, would you consider the charges reasonably competitive.
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Do they match up to a fixed amount or is this €4K some percentage of your current gross?
Maybe this should be addressed to my employer, but am I restricted to joining this scheme if I want to avail of the contribution or have I the liberty to join another scheme? If so, is there a simple & quick way of comparing the charges for the various schemes? Thanks again.
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I would imagine that you would need to join this scheme to avail of employer contributions but you need to ask them. Is this an occupational pension scheme or an employer PRSA scheme?
 
Club - somebody has been selling you porkies!

The PB Fee is €9.50 per annum, it is not €5 per month.
 
At the risk of sounding ignorant, what is the difference between an "Occupational Pension Sheme" and an "Employer PRSA scheme"?
 
apple1 said:
At the risk of sounding ignorant, what is the difference between an "Occupational Pension Sheme" and an "Employer PRSA scheme"?
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Sorry - I thought it was around €5 per month. So a monthly charge of that amount would include the PB fee plus some underwriter fee? I know that my old occupational scheme charge a policy fee of c. €4 p.m. and I thought that this was all a PB charge?
 
apple1 said:
At the risk of sounding ignorant, what is the difference between an "Occupational Pension Sheme" and an "Employer PRSA scheme"?
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What I meant by "Employer PRSA scheme" is simply a PRSA made available by the employer (as they are legally obliged to do if they don't have an occupational scheme open to all employees) allowing employees to make contributions via payroll in order to get tax/PRSI relief at source rather than having to claim these separately. The employer may (optionally) also make contributions on behalf of the employee (e.g. matching contributions up to some limit).

An occupational scheme is what would have been the normal employer scheme up to recent years. Some specific rules governing occupational schemes versus other pensions types (e.g. employer PRSA, standalone PRSA, personal pension plan/Retirement Annuity Contract etc.) would be different.

Not an authoritative explanation but hopefully of some help?
 
Well €5/month is €60 per annum - so a small part goes to Pensions Board and the bulk of it is just a handy way for the underwriter to write off the policy holder's money to the ubiquitous "fees & charges".

Apple - there are differing rules surrounding PRSAs versus Occupational Pensions in respect of the following (this list is not exhaustive): levels of contribution allowed, how the benefits may be handled at retirement, level of benefit allowed, reporting/compliance requirements, level of charges allowed.
 
My employer can take my AVC contributions at source from my salary, if I set up a standalone PRSA (through a broker to avoid some of the contribution charges) will I have to regross my contributions ( regross the after tax income), or could I get my employer to allow the contributions at source from my salary?. This a point I'm not clear about
 
If you are offered an AVC facility then are you sure that you can set up an external pension for your own AVCs? I thought not but can't remember. I don't understand the "regrossing" issue but if you make standalone pension contributions off payroll then you need to claim tax and PRSI relief yourself manually. For ongoing contributions Revenue will normally adjust your tax credits. For lump sum contributions you will normally get the refund as a lump sum. PRSI relief will be paid as a lump sum after the end of the tax year when you claim it in my experience.
 
Thanks for that Clubman. What I was looking at was making future pension contributions via a PRSA separate from the company, as if I can go via Labrokers.ie or another low fee broker I can avoid the contribution fees of up to 5% on the same fund that is in my AVC (Eaglestar Performance), I'm not planning to transfer money from my AVC to the PRSA.

"Regrossing" referred to the fact that when I make lumpsum payments to my AVC I tend to take out bridge loans for the part that I should get tax back on, so it's regrossed that way if you know what I mean (before tax) which means a bit extra can go in. So, I was wondering if the same would have to be done if I went outside my companies choice of 4 funds in the AVC and went for a PRSA, I wasn't sure if I could still put money into the PRSA before any tax is paid, via payroll. From my reading of what you said I should be able to have money go direct to the fund before any taxes would be taken, once I do it manually ( get in touch with revenue etc.)

Thanks for the help !
 
If you make a lump sum contribution to a pension then you should get the tax and or PRSI relief back soon after you claim it either via lump sums or adjustments to your tax credits (for tax relief on regular contribution premiums) if that's what you mean?

Sorry - I just don't understand the "regrossing" point. Probably just me being dumb... :eek:
 
ClubMan said:
If you make a lump sum contribution to a pension then you should get the tax and or PRSI relief back soon after you claim it either via lump sums or adjustments to your tax credits (for tax relief on regular contribution premiums) if that's what you mean?

Sorry - I just don't understand the "regrossing" point. Probably just me being dumb... :eek:
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It's probably my bad english Clubman :) . In the past I've had 10k cash to put into my AVC and claim for the previous years tax, I've then taken out a loan for about 7,800, to invest a total of 17,800 and the tax back pays off the loan, so when I talk about regrossing this is the sort of thing that I mean. If I couldn't get the tax breaks at source from salary on the monthly investment then I would have to do the same as with a lump sum, and "regross" it in my mind, the downside would be the hassle of loans and interest on them.

So if I plan to invest €1000 a month in a PRSA, and it's taken from my salalry at source then that's fine, but if that doesn't happen I would have to save at least €570 a month after tax, and later regross it to 1k, if you know what I mean, and claim the tax later. That's the point I wasn't certain about, but it seems that the money can be taken at source before tax, so their is no hassle;)

I've made the whole thing more comlplicated than it is:D
 
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