Personal pension and PRSAs

[Pat Gleeson]

Hi, I wonder if I could ask the forum for advices. I have a personal pension plan since 1991, with premium increases of approx. 5% per annum. The money is invested in a with profit fund with a maturity date of age 70 years. I also have a PRSA with AIB. I want to get the best return for my money at this stage, as I want to retire at 60 if possible. I am thinking of upping the monthly payment to the PRSA to €500 p.m., but don't feel the need to pay AIB 5% each month. If anybody could advise me, I would be very grateful.

Thank you.

 

[F. Kruger]

If your Personal Pension was taken out in 1991 then it is likely that the charging structure that applies to it is not customer friendly and the first thing that you should do is to cease any automatic increases/indexation on it. You could write to the Pension Provider and ask for a breakdown of all charges.

It was normal back then to have a maturity date of 70 written into the policy and I suspect that you may have a contract that has Initial & Accumulation units on it. Initial units are where the commission charges are taken from and it may be the case that you would be penalised a certain portion of these units should you wish to transfer the fund or take your pension before age 70.

I also note that you are invested in a With Profit Fund. The object of this fund is to 'balance' the return that you are getting so that the growth is gradual as opposed to following the performance of the underlying assets. It may be that you have a minimum guaranteed fund promised at age 70 or that there is a minimum amount that the fund is guaranteed to grow by every year.

Some would argue that you should cut and run from this type of plan but it may be wise to do some more research before you take this action

Provided that you are comfortable with the funds that are available from other PRSA Providers and the amount of risk that you want to take, it may be wise to put in place a PRSA with just a 1% Annual Management Charge and no charge on the contribution, thus saving yourself €300 per annum (5% of €6,000). You can leave the fund with AIB that you already have accumulated or you can transfer it.