Personal pension vs prsa & advice

[futisle]

Hi all,

Just wondering if I can get access to the same index tracking funds through a personal pension for 0% contribution and 0.75% management fee, is there any reason I should look at a prsa which will have much higher chages to access the same funds?

Also, I spoke with an authorised adviser this morning. He began by telling me that prsas had a 5%/1% charge and that was it that no reduction could be found on this anywhere. I'm sure many of you here will know this is wrong! and it was "news to him" when I pointed it out. I would like to split my pension fund over a number of index tracking funds. I asked for advice on this and he said " we'll get the previous performance charts and see then". But pst performance does not etc... Does this seem to be poor or am I expecting too much for my money? Should I be moving on to another adviser?

 

[ClubMan]

Just wondering if I can get access to the same index tracking funds through a personal pension for 0% contribution and 0.75% management fee, is there any reason I should look at a prsa which will have much higher chages to access the same funds?

PRSAs don't necessarily have much higher charges - it's possible to get some PRSAs for 0%/1%. If the personal pension plan is flexible (e.g. you can stop/alter contributions without penalty) then I don't necessarily see any major pitfalls versus a PRSA other than not being able to transfer into another PRSA later and (as mentioned elsewhere) consolidating pensions isn't always necessarily a no brainer and there is no harm (other than the possibility of a little extra admin hassle) in having more than one pension albeit normally only one accepting contributions at any one time. Remember that you can claim tax and PRSI relief on standalone PRSA or personal pension contributions.

Also, I spoke with an authorised adviser this morning. He began by telling me that prsas had a 5%/1% charge and that was it that no reduction could be found on this anywhere.

This is wrong and if an AA told you this then this is disgraceful - are you sure that he wasn't actually a tied agent? 5%/1% is the maximum that can be charged on a standard PRSA but as evidenced by many other threads here on AAM you can get 0%/1% easily enough. Try www.prsas.ie for example or maybe www.prsacentre.ie or www.labrokers.ie. The latter two will probably charge an arrangement fee but www.prsas.ie leaves it up to you if you want to make a charitable donation in lieu of arrangement fees.

I asked for advice on this and he said " we'll get the previous performance charts and see then". But pst performance does not etc... Does this seem to be poor or am I expecting too much for my money? Should I be moving on to another adviser?

Yes - this guy sounds clueless.

 

[futisle]

Thanks Clubman. I was a bit disturbed after meeting him this morning. Especially when he said he'd have to check about the "flexibility of prsas and what you could and couldn't do in terms of moving and converting them". Not good from someone who has "pension adviser" above his door. Have given him the boot, so now back to looking for a decent adviser.

I must start checking again about the pros and cons of pesions vs prsa's. I had hoped I'd get some quality advice for a fee and then I could move on to an execution only broker to set it up. More research required!

 

[LDFerguson]

Are you willing to disclose your age, the contribution level you're thinking about and the index-tracking funds you're looking for?

Liam D. Ferguson
www.ferga.com

 

[futisle]

Are you willing to disclose your age, the contribution level you're thinking about and the index-tracking funds you're looking for?

Yes, I'll be 26 next month and was thinking of contribution around 400 a month (including tax relief). As for the index tracking funds, I was hoping to pay for some advice on those. I'd like to spread my risk so I think that American, Europe, UK, Japan and Asia ex-Japan would be the ones to go with. The question is how to spread my money over these funds. I believe that irish equity is available but I'd be slow to put anything into that given that fact that I live and work here already. I had only looked into this through prsa's but if I can get access to these funds with lower charges through a personal pension, is there any reason I shouldn't go down that route?

 

[LDFerguson]

It's possible to get a Personal Pension with a policy fee of €4.25 per month, 100% allocation, no bid/offer spread and annual management fee of 0.75% for index-tracking funds. This would be on a zero commission basis, so a fee would be payable.

Whether or not a PRSA is most suitable for you depends on your personal circumstances. For example, if you anticipate that you will be self-employed or in non-pensionable employment for the rest of your working life, a Personal Pension has no practical advantages over a PRSA. However, a PRSA has an advantage that an employer can make contributions directly to it, if that's an issue for you. There are other differences.

Hope this helps.

Liam D. Ferguson
www.ferga.com

 

[ClubMan]

However, a PRSA has an advantage that an employer can make contributions directly to it, if that's an issue for you.

On the other hand presumably it's possible to chop and change and have multiple pensions over time? I am in this situation myself (e.g. paid up personal pension plan from when I was employed but no occupational pension was provided, buy out bond containing previous occupational pension savings transferred in, PRSA alive and kicking etc.). For example if the original poster chose a personal pension plan but later entered employment where a PRSA or occupational scheme was on offer then they can park the personal plan (assuming it allows this without penalty etc.) and participate in the latter. Of course having multiple fragmented pension policies does mean a bit of extra admin hassle for tracking and managing them all which might not suit everybody...

 

[futisle]

Thanks Liam and Clubman. You're a great help

It's possible to get a Personal Pension with a policy fee of €4.25 per month, 100% allocation, no bid/offer spread and annual management fee of 0.75% for index-tracking funds. This would be on a zero commission basis, so a fee would be payable.

When you say a fee, what do you mean? The brokers fee to set up the pension plan? Also how flexible is the pension as it sounds very like a good deal, much better than any prsa's I've found if it can match the flexibility.

Am I right in saying that I can have as many pensions as I want but only 1 prsa, or is there a restriction as there is with prsa's. I've a long way to go before retirement and I'm trying to have things as flexible as possible for the future.

I think the best way to go is to pay a fee for advice on the right product/funds/spread of the funds and the head for an execution only broker. What do you think?

 

[ClubMan]

When you say a fee, what do you mean? The brokers fee to set up the pension plan?

I believe that's what he means. A fixed once off fee for arranging the plan. At least check that it's once off and doesn't also take a slice of any ongoing lump sum contributions etc.

Also how flexible is the pension as it sounds very like a good deal, much better than any prsa's I've found if it can match the flexibility.

How were PRSAs any less flexible than this personal pension plan?

Am I right in saying that I can have as many pensions as I want but only 1 prsa

I have accumulated over the years ... one buy out bond, two personal pension plans and two PRSAs one of which is actively accepting contributions.

I think the best way to go is to pay a fee for advice on the right product/funds/spread of the funds and the head for an execution only broker. What do you think?

If you need advice then that is the way to go.

 

[futisle]

How were PRSAs any less flexible than this personal pension plan?

I meant that if the pension could match the prsa's flexibility, being able to stop payments for a while, or all together etc.

Ya I think I need the advice, as I'm unsure how I should spread my money across the various index tracking funds available. Also, I can't seem to find all of the products out there. I have never seen the pension plan that Liam mentioned above, so discussing it with an adviser seems a good way to go.

 

[ClubMan]

I meant that if the pension could match the prsa's flexibility, being able to stop payments for a while, or all together etc.

Many (most?) personal pension plans provide such flexibility these days as far as I know.

 

[LDFerguson]

Many (most?) personal pension plans provide such flexibility these days as far as I know.

Yes most do. If the charges are front-loaded (i.e. higher charges in the first year than in subsequent ones) there may be some restrictions on skipping or ceasing contributions but as we're discussing "nil commission" fee-based plans, that doesn't apply in this context.

When you say a fee, what do you mean? The brokers fee to set up the pension plan?

Yes as Clubman said above, if you want the nil commission charging structure on a pension plan as described, you need to pay the broker a fee for setting it up. Be aware that if a broker is getting paid commission on an ongoing basis from your contributions, s/he is therefore being remunerated for ongoing service such as valuations, future funding or investment advice etc. If you choose a nil commission plan and pay the broker a fee for setting it up to start off with, you will also need to pay the broker a fee for any future services you might require during the life of your pension, although you can always deal directly with the pension company for free for many basic requirements such as valuations, change of Direct Debits etc.

Am I right in saying that I can have as many pensions as I want but only 1 prsa, or is there a restriction as there is with prsa's.

If you're self-employed or in non-pensionable employment you can have as many Personal Pensions or PRSAs as you like. Tax relief will be granted on the aggregate of all your contributions in any given tax year.

I think the best way to go is to pay a fee for advice on the right product/funds/spread of the funds and the head for an execution only broker. What do you think?

It's likely that the same broker will both advise and execute for a fee.