Non-Standard PRSA vs Standard PRSA

Nova1919

Registered User
Messages
5
Hi there. I've recently started contracting and I'm using an umbrella company and I asked them about pension information. They recommended opening a PRSA and gave me the details of a broker to contact.

I contacted the broker and after some questions, he sent me out some paperwork to fill out. While filling them out I noticed a disclaimer saying this was a "non-Standard PRSA" and to ensure I've read everything carefully. So I looked up some information regarding Standard vs. Non and emailed the broker to ask what the difference int he fees were, etc. and he just emailed back saying "we don't recommend Standard PRSAs because there isn't as much choice". I asked him point blank if they offered Standard PRSAs and he said no. I assume that means just his company doesn't offer them or are they hard to come by?

Now, I'm basically looking to just sock money away... I'm not going to be looking at it much at all and definitely don't know enough to do the investing myself. Fees are 2% contribution and then about 1-1.2% annual on the value of the fund. I don't mind paying higher fees if it's the best thing to do, but I'm not sure that it is and the broker won't give me any further information.

So basically... why would ANYONE want a non-Standard PRSA if the fees aren't capped and does anyone know a reasonable broker I can go through who might answer my questions?
 

SBarrett

Frequent Poster
Messages
3,128
Much greater fund choice. Fees can go both ways too, they may be higher or lower than the standard PRSA.

The higher AMC is usually for specialist funds such as a smaller companies fund or an Indian equity fund, funds that are more expensive to run and trade in.

Steven
www.bluewaterfp.ie
 

SBarrett

Frequent Poster
Messages
3,128
Much greater fund choice. Fees can go both ways too, they may be higher or lower than the standard PRSA.

The higher AMC is usually for specialist funds such as a smaller companies fund or an Indian equity fund, funds that are more expensive to run and trade in.

Or you may want to have a self directed PRSA which is a non standard PRSA.

Steven
www.bluewaterfp.ie
 

Nova1919

Registered User
Messages
5
I will check out Labrokers.ie. I talked to a different broker today and he was very nice and said I probably want a Standard PRSA and said the fund rate would be 1%. When I pressed him on how much the monthly allocation fee was, he said between 3.5 - 5%! From what I read in a different thread, this is very high. Will look into Labrokers.ie tomorrow and see if I can set something up with them.
 

SBarrett

Frequent Poster
Messages
3,128
You can always pay the advisor a fee. If they get paid by commission, it will effect the monthly contribution charge (afterall, it is you who pays it). If you pay by fee, you will get 100% allocation.

Labrokers are an execution only site and you get no advice.


In other words, if you want advice on your pension, you have to pay for it one way or the other.

Steven
www.bluewaterfp.ie
 

Nova1919

Registered User
Messages
5
I hear you... so perhaps I look for a broker who just charges a fee? This way I can compare the overall cost to myself in the long run?

On a related note: so through Labrokes they have a Zurich Standard PRSA that is only 1% fund management and 100% allocation. This seems like a great deal so I'm not sure why people would not automatically gravitate towards this? What should I be checking that I'm not?

I'd like to note that I have zero idea about investment and will probably never look at this pension until I'm ready to withdraw so I like the ones that automatically change investment style as you age (as the Zurich one does).
 

SBarrett

Frequent Poster
Messages
3,128
I hear you... so perhaps I look for a broker who just charges a fee? This way I can compare the overall cost to myself in the long run?

On a related note: so through Labrokes they have a Zurich Standard PRSA that is only 1% fund management and 100% allocation. This seems like a great deal so I'm not sure why people would not automatically gravitate towards this? What should I be checking that I'm not?

I'd like to note that I have zero idea about investment and will probably never look at this pension until I'm ready to withdraw so I like the ones that automatically change investment style as you age (as the Zurich one does).

Because some people don't know what they are doing when it comes to investing or what they need to do to set up a pension. Or would like someone to talk to when the markets start going haywire and they see their investment falling day after day. Should they sell or stay? Who can answer all the questions I have?


Steven
www.bluewaterfp.ie
 

LDFerguson

Frequent Poster
Messages
4,053
I think that people really need to understand the difference between an execution-only service (no advice) and advice. (In the interest of full disclosure, my firm can arrange financial products on execution-only terms or with advice so I'm agnostic and not trying to push one side or knock another due to any bias of my own.)

But using @Nova1919 as an example, here are a few points:

  • Depending on the nature of the contracting work, a contractor should look at both a PRSA and an Occupational Pension Scheme (OPS). Neither one is automatically better for a contractor. Company contributions to an OPS attract more favourable PRSI and USC treatment than PRSAs.
  • A company can put a higher percentage of salary into an OPS than into a PRSA.
  • At retirement, an OPS has extra options as to how the tax-free lump sum can be calculated which may or may not be to your advantage depending on your circumstances. For example, it is possible in certain circumstances to withdraw 100% - an entire OPS fund - as a tax-free lump sum at retirement.
  • The annual charge on a PRSA is usually 1%. On an OPS it can be as low as 0.4%.
  • While the above points would seem to suggest that an OPS is always better than a PRSA, that's not the case either. An OPS requires a trustee; a PRSA doesn't. An OPS is obliged to make a small annual contribution to the funding of the Pensions Authority; a PRSA is not. A PRSA can be transported from one employment to another; that's not as simple with an OPS. A Standard PRSA conains legally-enforced caps on charges; an OPS or a Non-Standard PRSA do not.

I also agree with Steven's point above about investments. The Zurich Life lifestyle strategy has been mentioned and it's as good as any. Puts you in one of their higher-risk, higher potential return funds in the early years and then gradually switches you into lower-risk funds as you approach your selected retirement age. (Of course the strategy assumes that you are going to retire at the age you initially chose - in reality how many people actually retire at 65 just because they chose that on a pension application form 20 years previously? If your plans change, do you remember to change the lifestyle strategy on your pension?)

If it was 2008 and you were many years off retirement age, you'd have been in the Dynamic Fund. It dropped by 37.8% in 2008. At the time, the media was gleefully writing stories about billions being wiped off stock markets and how this time it was different, that a fundamental shift had happened and that the financial system was broken. So you're reading such stories along with all the other bad news about the banking crisis, property price drops and huge job losses everywhere. You're wondering if the media is right and this time it's different. You've watched the value of your fund drop through 25%, through 30%, through 35% and still going. You start to wonder if you should cut your losses. Maybe switch into cash for a while and go back if/when things have stopped falling. If you're an execution-only customer, you won't have anyone to talk to about that.

As I say, I have no quibble with execution-only services at all and think they have an important place in the market. But I believe that you should only avail of an execution-only service if you really know what you're doing. Otherwise you run the risk of investing money into an inappropriate financial product, or at the very least being unaware of another product that would have suited your specific needs more efficiently. You also run the risk of making investment mistakes.

Regards,


Liam
http://ferga.com
 
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Nova1919

Registered User
Messages
5
Thank you both so much for your responses (I will also look into the OPS).

Maybe this is where I'm getting confused (please bear with me, I'm really trying to understand this all). I have 2 different pensions with previous employers. I have money in both and I assume (rather correctly or not) that they are in some group pool of funds... say Fund Pool A (which is made up of a bunch of funds)... and as different funds in that pool start to perform not as expected... then the pension provider (we'll say Irish Life) would change the funds that are in the pool as they see fit. So I am in Fund Pool A always, but the funds that make up the pool may change. I have the option of moving to Fund Pool B (higher risk) or C also if I want to.

What I'm hoping to do is to find a PRSA that I can put money into a pool of funds (say 3 options, low, medium, high) and just leave it there. I don't think I'll really move my money around to individual funds. Is this what I get with an execution only from Labrokes for the Zurich one? Or do I actually have to pick which funds I want to invest in myself?
 
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