Pension advice-return to employment

[cully]

Hi,

I was made redundant 4 months ago but thankfully am starting a new permanent job on Monday. I worked for the previous 10 years in a medium sized company and had a 5% contributory defined benefit pension which i contributed to for 7 of the 10 years. I have deferred this pension until retirement age.

The company i am starting with are quite small and do not offer a pension as part of the package. I believe my best option is to start a PRSA. I would appreciate any advice from posters on the most appropriate PRSA for some one in my position.
I will give a brief outline of my current financial situation:

My self and wife are both early 30's

Wife works full time and earns approx 55-60k per year. She has a 5% contributory defined pension and has contributed for the last 4 years (when she joined the company). She intends to continue working for the forseeable future.

Primary residence has a mortgage of approx 350k on a tracker of 1.68%. Would estimate value at 270-290k. Am not bothered by negative equity as do not intend moving and house is 4 bed semi in Cork city suburbs - should be big enough if we decide to have more kids (have a 5 month old boy).
Have no other loans or debts.

Have approx 120k in cash (all earning ,nett of DIRT, more than mortgage interest rate) and PIP worth approx 20k

New job pays approx 50k per annum but all going well will increase by approx 20k in year two.

What PRSA/type of PRSA would people recommend? I would not consider myself to be a huge risk taker, but given the timescale of the PRSA, I would have no problem with a medium risk product in the early years (intend working at least until i am 60).

Thanks

Cully

 

[GSheehy]

Does the new employer offer a Salary Deduction facility for a PRSA or is there a probability that they may make contributions to your PRSA at a future date?



GS

 

[cully]

GSheehy,

Employer will offer salary deduction facility for PRSA however I don't believe they will contribute at the moment. The possibility of them commencing contributions in the future would probably depend on how much money i can make for them. As I mentioned before its quite a small company (only 10 employees), however they make money every year and pay bonuses relative to the years profitability. It would of course be an option to use some or all of the potential bonuses as PRSA contributions as this would be the most tax effective method of using the money I believe

 

[GSheehy]

Three Options:

1. Go with the nominated PRSA provider that the employer has appointed and have your payments deducted through salary. Do ask what % of each contribution is taken as a charge. The Annual Mangement Charge should be 1%. You should get some advice on the provider, product and funds in return for the contribution charge.

2. If there is a contribution charge and you feel that it is excessive (+ you are comfortable with choosing the PRSA you want and the Funds to invest in), you could as the employer to set up an 'execution only' (no advice) PRSA for you by appointing a different PRSA provider and have the charge limited to the AMC of 1% only. Your employer is not obliged to offer more than one PRSA provider.

3. Set up your 'execution only' PRSA by Direct Debit from your own bank account and claim Tax and PRSI 'manually' by submitting the PRSA1 Certificate to Revenue. First you send it to your local tax office and when this confirmed you apply to Revenue in Limerick for PRSI relief.


GS