Irish Life AVC through Marsh V's PRSA AVC's and Revenue Clarification

J

jpietsch

Guest
Hi I am a TUI member and took out a AVC through Marsh.
I would like some comment on the management fees that this service incurrs.

Irish Life :

Fixed charge 3 € per month = 36 €
Regular contribution 1.90%
Once off contribution 0.95%

Marsh Financial Service Charge
Total contributions 5%

- How does this compare with our AVC plans?
I'd imagine that it is quite high.
Could I change the provider of my AVC, by transferring the existing amount to somewhere else with lower administration charges etc?

Thanks,
 
In recent times, it has become possible for teachers, nurses, civil servants etc., to take out AVCs with any provider or broker they choose, when before they were restricted to one broker and provider.

Such a stand-alone AVC must be a PRSA. There's plenty of information on this forum about PRSA charging structures. The standard product features a charge of 5% of each contribution and 1% of the fund annually. We have PRSAs available with charges of less than 5% per contribution.

Regards,

Liam D Ferguson
[broken link removed]
 
In recent times, it has become possible for teachers, nurses, civil servants etc., to take out AVCs with any provider or broker they choose, when before they were restricted to one broker and provider. Such a stand-alone AVC must be a PRSA.

Hi Liam,

Are you sure about this? Can the teachers, nurses, civil servants, guards, prison officers etc get the amounts deducted from their salary? Can they go for any PRSA or do they need to go to one nominated by their employer? When did the rules change? Is it possible to transfer funds from existing AVC arrangements into a PRSA?

ajapale
 
AVC PRSAs

Hi ajapale,

Are you sure about this?

Yes.

Can the teachers, nurses, civil servants, guards, prison officers etc get the amounts deducted from their salary?

No. At present, if they want salary deduction, they have to use their employer-approved arrangement. If they want to choose their own, they pay gross by Direct Debit and claim back their tax and PRSI relief.

Can they go for any PRSA or do they need to go to one nominated by their employer?

They can go for any.

When did the rules change?

The rules didn't change as such but the Revenue issued clarification earlier this year, as to how such standalone AVC PRSAs could be put in place. This clarification doesn't just cover public servants - similar freedom is also afforded to private sector employees who wish to bypass their employer's nominated AVC scheme.

Funding rules and other conditions still have to be adhered to.

Is it possible to transfer funds from existing AVC arrangements into a PRSA?

Only with great difficulty at present. Hopefully soon.

Liam D Ferguson
[broken link removed]
 
Re: AVC PRSAs

Thanks Liam,

This looks like good news for teachers & Co.

ajapale
 
Re: AVC PRSAs

thanks a lot. I will have a look at the PRSA info on the site. Thanks
 
Re: AVC PRSAs

So called 'stand alone' PRSAs are legally founded on sand ..it was a Revenue interpretation and an odd one at that!

There's three things you shoudl be aware of before you jump out of your AVC into a so called 'stand alone' AVC PRSA :

(1) As pointed out already, you won't get tax and PRSI/Healh Levy relief at source. You will have to pay gross and claim back reliefs etc. This can be painful.

(2) If you jump into a Standard PRSA, you can not invest in a guaranteed or smoothed fund other than a pure cash fund. The Irish Life Secured Performance Fund, for example, is not available on their Standard PRSA. This is a crazy legislative provision ..not the doing of the PRSA providers.

(3) You might be better off seeing how SPEARS may work out ...this is a proposed single public sector AVC scheme to be based on the PRSA design. The Government have commited them selves to this idea (see Budget 2003 speech) but it may well take a few years to implement.

If I were you I'd stay where I am at the moment...and wait to see how SPEARS may bring. SPEARS charges are likely to be cheaper than the max charged allowed under a Standard PRSA.

Anyway its not all about charges, although people become fixated about charges ..its all about how much you pay in and the investment return you earn ..over the longer term, the difference in charges doesn't really matter.
 
Re: AVC PRSAs

So called 'stand alone' PRSAs are legally founded on sand
Hi RAIPI,
you have me worried! Should I be worried if my 'stand alone' PRSAs is legally founded on sand?
ajapale
 
Re: AVC PRSAs

So called 'stand alone' PRSAs are legally founded on sand ..it was a Revenue interpretation and an odd one at that!

I too am fascinated by this comment. Perhaps you can expand on it as the points above, while explaining some relevant caveats in this context, don't seem to illustrate how "standalone" PRSAs might be dodgy.
 
Re: AVC PRSAs

Show me where it exists in legisaltion? It doesn't. It was based on a Revenue 'interpretation' ..one that the Pensions Board don't obviously agree with, if you read between the lines of their statment on same of September 2004 :

Read for yoursef:

" In Section 787A(1)(i) and (ii) of Chapter 2A of the Taxes Consolidation Acts, 1997 (the “TCA”) as amended, there is an interpretation of additional voluntary contributions which, for Revenue purposes, means contributions made to a PRSA by an employee, ......These circumstances should not be confused with the traditional meaning and intention of additional voluntary contributions under the Act, other than Part X.

The Board and the Revenue Commissioners worked together to formulate a series of Frequently Asked Questions to assist Providers in the execution of their Revenue obligations and PRSAs and this document was circulated, on behalf of the Revenue, by the Board to all Providers in November 2003 for information. Some Providers have taken a certain interpretation in respect of Q&A 16 – What are the obligations of Providers in relation to AVC PRSAs?
.....
The interpretation taken by some people has led to unnecessary media reporting and articles that have led to an ‘uneven’ playing pitch among Providers and confusion among consumers.

...........
Notwithstanding the interpretations being taken by some Providers, Revenue have confirmed that their position in respect of additional voluntary PRSA contributions is clearly outlined in FAQ 16 and they are committed to facilitating all who wish to make contributions to PRSAs and they continue to remove obstacles to the progress of PRSAs and introduce initiatives which might encourage their success. This commitment does not remove any of the responsibilities of either the trustees of occupational pension schemes or PRSA Providers in respect of monitoring contribution or benefit levels in respect of additional voluntary PRSA contributions as set out in Q&A 16."

Doesn't exactly sound like a ringing endorsement of the 'stand alone' AVC PRSA to me!
 
Re: AVC PRSAs

Show me where it exists in legisaltion?

I'm not contradicting you - I'm merely looking for clarification. I'm still confused but I presume that what you're saying is a bit nebulous is the concept of the "standalone AVC PRSA" as opposed to standalone PRSAs per se which is what I thought you meant originally?
 
Re: AVC PRSAs

Yes ..I was only referring to the very murky area of paying AVCs to a PRSA that is not legally linked to an occupational pension scheme. Eagle Star are the main proponent of this particular idea.

I'm not talking about ordinary PRSAs ..not used as an AVC.

They are well and truly founded in law!
 
Re: AVC PRSAs

OK - thanks for the explanations. I was a bit concerned as non AVC PRSA holder (originally standalone but currently under an employer's scheme). Not sure if it makes ajapale feel any better though!
 
"If I were you I'd stay where I am at the moment..and wait to see how SPEARS may bring. SPEARS charges are likely to be cheaper than the max charged allowed under a Standard PRSA."

Who knows what SPEARS charges are going to be like if/when they eventually emerge? Would it not be better advice to invest in an AVC PRSA now and if SPEARS turns out to have lower charges and everything else comparable, cease contributions to the PRSA (which of course you can do without penalty) and start the SPEARS?
 
But your advice is based solely on the issue of charges. There are other points, some of which I mentioned already :

(1) fund choice. Standard PRSAs don't offer guaranteed funds. This may or may not be important to this teacher.

(2) advice. If you decide to do a DIY with your AVC, you're on your own., Teacher and other public sector employees often have very complicated pension scheme benefits and rights, e.g. options to buy back service, credited service, etc.

(3) investment performance. At the end of the day this is the most important thing. Jumping ship now to save a few pennies could be a big mistake in the longer run.

(4) on the stand alone PRSA AVC issue, you don't get tax relief at source. There is a cash flow delay on getting relief..at least in the first year.

I have no commercial interest in this ..do not work for Marsh, etc. Just giving my opinion ...if I were that teacher I'd stay where I am ..and wait to see what SPEARS will bring.
 
"(1) fund choice. Standard PRSAs don't offer guaranteed funds. This may or may not be important to this teacher."

True. But in the context of Askaboutmoney (as distinct from actual meetings with real clients) I can only answer the question as asked. Otherwise I'd be insisting on a full fact-find from every person who asks a question on Askaboutmoney, before posting a reply.

"- How does this compare with our AVC plans?
I'd imagine that it is quite high.
Could I change the provider of my AVC, by transferring the existing amount to somewhere else with lower administration charges etc?"


This was the qury part of the original post and it was asking about charges.

"(2) advice. If you decide to do a DIY with your AVC, you're on your own., Teacher and other public sector employees often have very complicated pension scheme benefits and rights, e.g. options to buy back service, credited service, etc."

(i) Who said anything about doing a DIY?
(ii) In my experience, both public and private sector pensions can be complicated. Public sector employees may have complicating factors including the ones you mention. Private sector employees may have retained benefits from DC and DB schemes, private plans, buy out bonds etc., all of which need to be considered before any pension advice is given.

"(3) investment performance. At the end of the day this is the most important thing. Jumping ship now to save a few pennies could be a big mistake in the longer run."

Of course this is true. But can you or anyone else recommend a fund that will outperform one of those available through a Standard PRSA in advance?

"(4) on the stand alone PRSA AVC issue, you don't get tax relief at source. There is a cash flow delay on getting relief..at least in the first year."

Again, true. But compare the charges quoted by the original poster with those of a Standard PRSA and I think you'd have to agree the difference more than compensates for any short-term cashflow benefits foregone.

"Just giving my opinion ...if I were that teacher I'd stay where I am ..and wait to see what SPEARS will bring."

Such is the beauty of Askaboutmoney that all opinions are welcome...even those that conflict with my own. ;)

Regards,

Liam D Ferguson
[broken link removed]
 
Re: Irish Life AVC through Marsh

This is an excellent thread concerning public service and PRSA AVC's.

What ever happened the SPEARS idea? I think it was mentioned in a budget speech 2003 by CMcC but has it developed?
 
Hi I am a TUI member and took out a AVC through Marsh.
I would like some comment on the management fees that this service incurrs.

Irish Life :

Fixed charge 3 € per month = 36 €
Regular contribution 1.90%
Once off contribution 0.95%

Marsh Financial Service Charge
Total contributions 5%

- How does this compare with our AVC plans?
I'd imagine that it is quite high.
Could I change the provider of my AVC, by transferring the existing amount to somewhere else with lower administration charges etc?

Thanks,

charges have changed since this post for tui avc scheme

irish life
allocation 94.5%
mgmt fee .65 to 1.25 i think
no bid/offer
no policy fee

friends first
94.75% allocation
1.25% mgmt fee
no bid offer
no policy fee
 
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LA brokers is good for PRSA AVC BUT.........if you going for IRISH LIFE PRSAs the Choice is VERY LIMITED. It is the consensus Fund with a 10 year return of 3.94% per annum and since Launch (1996) a return of 9.4%. SO this is the only investment option you have.

The other Second option is - Pension protection Fund with a return 10 year return of 5.6% per annum.

The third and Last option is cash Fund with a return of 2.3% poer annum over 10 year period (suited close to your retirement).

There is no option of change of funds to ANY OTHER than the remaining two !!!! Duh!!

So will you be better off paying the fleecing Marsh charge of extra 5% and investing in an Irish Life fund of your choice OR in capital protection fund now and then switching to a good Higher risk fund with higher growth long term (without any charge for the switch later).

I am with Irish Life through Marsh and deferred the Irish Life PRSA for the above reason.

The returns on other pension investments of Hibernian or eagle star does not look great either. My 2 Euro cents opinion.
 
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