PRSA and company pension?

P

Pensioneer

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I work for a company that provides pensions to all the staff. They do not provide access to any PRSA's. The annual cost imposed by the fund provider is ~1%. However the middleman takes 4.5% of all deposits. Furthermore the fund choice is very limited. Everyone in the company must put in a fixed percentage of salary and you may make optional AVC's after that. If there is a PRSA out there that imposes an charge that is <4.5% is it possible to open up a PRSA in parallel with the company pension so that more than 95.5% of my money is invested? Are their any such PRSA's?

TIA.
 
If your employer is matching your personal contributions to some level then even if the charges seem high you may be better off sticking with the occupational pension. If it is a defined benefit scheme rather than a defined contribution scheme then you should be careful too. You'd need to post more details and crunch the numbers to be sure.

You can get PRSAs that charge only an annual management fee of 1% (or maybe even less) and no other charges on a nil commission basis from certain brokers by paying a flat fee of a few hundred € if that's any use. Note that with a standalone PRSA as opposed to an occupational pension scheme (PRSA or "traditional") you will have to chase up the Revenue for tax and PRSI relief youself rather than it being granted at source via payroll. A little additional hassle that's worth bearing in mind.

Try the following (and any others that people recommend) for example but bear in mind that only an Authorised Advisor (as opposed to an RIAPI or tied agent) has agencies with all providers and may be worth contacting for advice:

www.labrokers.ie
www.primafinance.ie
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PRSA

If you are already a member of an employer occupational pension scheme, then your employer is not obliged to provide a PRSA facility.
In addition if you were to open up a PRSA whilst still a member of the company scheme, it could only be a PRSA for AVCs (Additional Voluntary Contributions), which again your employer would have to facilitate in terms of changing the rules of the main scheme to allow for a PRSA AVC.
Finally, even if the costs seems high (and they are not particularly), it would hardly be worth while opting out of the company scheme unless your employer was also prepared to contribute to the PRSA (unlikely since there is already a company scheme in place).
 
Re: PRSA

In addition if you were to open up a PRSA whilst still a member of the company scheme, it could only be a PRSA for AVCs (Additional Voluntary Contributions), which again your employer would have to facilitate in terms of changing the rules of the main scheme to allow for a PRSA AVC.
Click to expand...

I didn't realise this so apologies for any confusion caused by my post above!
 
Thank you for the quick replies. So it is legitimate to open a PRSA in parallel with my employers scheme.

The scheme is defined contribution. All contributions come from salary - there are no employer matching contributions. I can't opt out of the scheme, but I want to make AVC's but I think the 4.5% charge is too much.

Conan, you said:
In addition if you were to open up a PRSA whilst still a member of the company scheme, it could only be a PRSA for AVCs (Additional Voluntary Contributions), which again your employer would have to facilitate in terms of changing the rules of the main scheme to allow for a PRSA AVC.
Click to expand...

Can you point me at any legislation/guides that I can use to proove this to my employer? In this is in fact the case, I can request them to do that. If not, it's a question of wheter I prefer to chase the revenue myself or pay a third party 4.5% of my AVCs.
 
The Pensions Board website should have some information on this stuff in amongst the booklets and FAQs:

www.pensionsboard.ie
 
It occurs to me that you are concentrating on the value or otherwise of the entry charge and not so much on the annual management charge which you say is ~1%.

If you're looking around for value, you should also look at better value than ~1%. Even if you can get 0.75% per annum, this would be worthwhile. 0.25% per annum may not seem much, but remember that it's 0.25% of the overall accumulated fund, annually. An improvement of 0.25% on a fund of €500,000 is an improvement of over €100 per month. Might not apply now, but if you're younger it's one to consider.

As Conan says, the charges you quote are not excessive in the current climate. But if you feel that they can be bettered, another option you can investigate is to get your employer to establish a lower-cost AVC scheme. There are no restrictions on how many AVC schemes a particular employer may offer to their employees.

Liam D Ferguson
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PRSA AVCs

Some of the above responses may be giving the wrong impression.

You can always set up a PRSA. The question is whether you will get tax relief on it. If you won't, don't set it up.

If your employer's scheme allows additional voluntary contributions, i.e., if there is no upper limit on your own contributions, then your employer is under no obligation to facilitate AVC or any PRSAs, and you will not be allowed tax relief on any PRSA you set up privately. Almost all schemes allow AVCs, so check this out.

Only if the scheme does not allow AVCs must your employer must allow you access through payroll to an AVC PRSA, and you will be entitled to tax relief. However, there is an anomaly in that there is no obligation to change the rules of the existing scheme to facilitate it. However, I don't think this has yet been a problem in practice.

If you set up a PRSA privately, even if AVCs are not allowed, you will not get tax relief.

d
 
Re: PRSA AVCs

Hi d53,

Your post is certainly the clearest explanation of this I have seen so far. Perhaps the moderators could make it a key post?

Thanks.

I have a related question (apologies to the original poster) :) in the case where a DB scheme has "Buy Service" provision but no stand alone "AVC DC provision", is the Company obliged to provide a PRSA facility?

In this particular shcehme 40 years is the max service and Bought Service is a waste after that. These employees are on relatively low wages but substantial bonus and commission. The confusion arises because "Buy Service" appears on the payslip as "AVC".

I hope this is not too confusing.

Thanks,
Ajapale
 
Buy service

Ajapale

There are a number of different circumstances that I think could arise:

1. If a member will have less than 40 years service at retirement, i.e. can buy service, then the employer is not obliged to provide anything over and above the 'Buy Service' provision.
2. If a member will have 40+ years service at retirement, but has some unpensionable company earnings, i.e. is not eligible to buy service but is eligible for AVCs, then I think the employer is obliged to facilitate AVC PRSAs or change the existing AVC rules.
3. If a member will have 40+ years service but has no additional company earnings, then it depends on the scheme. In the unlikely event that the scheme is providing the maximum allowable pension benefits, a PRSA AVC would be irrelevant as no tax relief would be allowed on any contributions: in other circumstances, it would be the same as 2. above.

Hope this helps. d
 
Re: Buy service

Hi d53,

It does help, you have covered all the combinations I can think of. Many thanks and enjoy the weekend!

ajapale
 
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