I will try to make this as brief as I can.
My father was 65 last year. Even though he has been in the same job for around 30 years, up until a few years ago, he was self-employed for tax purposes and didn't have any proper pension rights through his employer. Last year he was invited to join a group pension scheme with his employer as a PAYE worker even though he only had 6 months left until his retirement date. Subsequently, he has been allowed to work for an extra year and maybe more depending on his health.
What I am trying to establish is if it is worth his while to invest in a pension at this stage. The employer is paying 2.9% of his salary into this scheme. It is proposed the money will go into a cash fund because of his age. My worry is that this will not make anything due to how low "money" rates are right now and that he may be wiser to invest it in something else. I believe he is still entitled to the 2.9% employer contribution?
My main question however is if it is worth his while to put extra money into this pension in the form of AVCs. He has been advised to invest as much as he can afford in AVCs (up to maximum of 40% of his salary). I understand that he can get 41% back on what he puts into this so that even if he loses money on a cash fund and fees that he will still be "up" in effect. I hope this makes sense.
According to the local financial advisor (PIBA registered) handling the pension on behalf of my father's employer (through New Ireland), this is "money for nothing" and he would be mad to not do this.
My understanding of what this advisor says is that for my Dad to put 20k into it would only cost him €11,800 net. So even if the 20k gets eaten into due to low yield and fees, and ends up worth 19,200 (for argument's sake) after a couple of years then it is still a good return on €11,800. Will he be able to withdraw all this as a tax free lump sum as stated by the advisor? After reading a good bit about pensions myself, I am not so sure.
This advisor was reluctant to give me any information regarding fees and said that was only a matter for the group scheme owners (employer). I thought this was a perfectly reasonable question but he retorted that he was never asked about fees by an individual member and that he could only disclose that information if and when my father decided to invest. This seemed ridiculous to me? I do realise he was doing me a favour to discuss this with anyone other than my father but he accepted I was enquiring on his behalf in good faith. I just felt I wasn't getting the full story.... He did eventually say that the New Ireland fee was 1% but I take it he will take a fee, is he required to state this upfront? Are there regulations regarding what the investor has a right to know before proceeding with a pension investment?
I should also note that my Dad took out a personal pension plan some years ago through BOI Life since but hadn't been paying much into this. It was worth approx 40k when it matured last year on his 65th birthday and they offered him the option to extend it for another year which has done (but without any more contributions I think). I believe this may affect his rights to take a tax free lump sum from the employer pension (if he invests in it). Again, the advisor said these are two different things and that the tax entitlements of one do not effect the other. According to him, the other pension (BOI Plan) did not impact on this as it was a different type of pension (legally?)
Again, after some reading on Revenue.ie and this site, I am not so sure. Any advice on how this effects the administration of the employer pension entitlements would be appreciated.
I am also not sure where this leaves his entitlement to purchase AVCs or how they will be calculated in respect of the other pension plan with BOI Life.
Many thanks for any help on these questions.
My father was 65 last year. Even though he has been in the same job for around 30 years, up until a few years ago, he was self-employed for tax purposes and didn't have any proper pension rights through his employer. Last year he was invited to join a group pension scheme with his employer as a PAYE worker even though he only had 6 months left until his retirement date. Subsequently, he has been allowed to work for an extra year and maybe more depending on his health.
What I am trying to establish is if it is worth his while to invest in a pension at this stage. The employer is paying 2.9% of his salary into this scheme. It is proposed the money will go into a cash fund because of his age. My worry is that this will not make anything due to how low "money" rates are right now and that he may be wiser to invest it in something else. I believe he is still entitled to the 2.9% employer contribution?
My main question however is if it is worth his while to put extra money into this pension in the form of AVCs. He has been advised to invest as much as he can afford in AVCs (up to maximum of 40% of his salary). I understand that he can get 41% back on what he puts into this so that even if he loses money on a cash fund and fees that he will still be "up" in effect. I hope this makes sense.
According to the local financial advisor (PIBA registered) handling the pension on behalf of my father's employer (through New Ireland), this is "money for nothing" and he would be mad to not do this.
My understanding of what this advisor says is that for my Dad to put 20k into it would only cost him €11,800 net. So even if the 20k gets eaten into due to low yield and fees, and ends up worth 19,200 (for argument's sake) after a couple of years then it is still a good return on €11,800. Will he be able to withdraw all this as a tax free lump sum as stated by the advisor? After reading a good bit about pensions myself, I am not so sure.
This advisor was reluctant to give me any information regarding fees and said that was only a matter for the group scheme owners (employer). I thought this was a perfectly reasonable question but he retorted that he was never asked about fees by an individual member and that he could only disclose that information if and when my father decided to invest. This seemed ridiculous to me? I do realise he was doing me a favour to discuss this with anyone other than my father but he accepted I was enquiring on his behalf in good faith. I just felt I wasn't getting the full story.... He did eventually say that the New Ireland fee was 1% but I take it he will take a fee, is he required to state this upfront? Are there regulations regarding what the investor has a right to know before proceeding with a pension investment?
I should also note that my Dad took out a personal pension plan some years ago through BOI Life since but hadn't been paying much into this. It was worth approx 40k when it matured last year on his 65th birthday and they offered him the option to extend it for another year which has done (but without any more contributions I think). I believe this may affect his rights to take a tax free lump sum from the employer pension (if he invests in it). Again, the advisor said these are two different things and that the tax entitlements of one do not effect the other. According to him, the other pension (BOI Plan) did not impact on this as it was a different type of pension (legally?)
Again, after some reading on Revenue.ie and this site, I am not so sure. Any advice on how this effects the administration of the employer pension entitlements would be appreciated.
I am also not sure where this leaves his entitlement to purchase AVCs or how they will be calculated in respect of the other pension plan with BOI Life.
Many thanks for any help on these questions.
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