Which is Better: PRSA or Personal Pension Plan?

Hi all,
I'm considering taking out a pension at the moment. I spoke to a broker about this briefly and will be talking to them again. Before doing so, I wanted to get some information from the community if possible.
The broker suggested that a Personal Pension Plan was the best product because he says that with a PRSA the companies take a percentage of the money you invest in your pension. He says that is not the case with a Personal Pension Plan.
My employer offers a standard PRSA with several providers and as I understand it those providers take 2% of the money you invest, off the top. (Does that sound right?)
My employer will make a contribution to the PRSA or pay the money to us as extra salary.

So what I'm really interested in hearing are the pros and cons of each kind of pension plan, PRSAs and PPPs.

Please bare in mind that I may be moving jobs at some stage before I retire - in fact that seems very likely.

I also want to know if I would save money by doing this business directly with the pension provider and finally if people have views on the best provider.

Links etc. are especially welcome.

Many thanks

curiosity00 said:

the companies take a percentage of the money you invest in your pension

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They don't just take it for no reason, it is to pay the advisor. And the same can happen with a personal pension plan.

With a PRSA, the employer contributions are liable to USC. That would be the same if they gave you a pay rise to make personal contributions. Ask your employer to implement an executive (company paid) pension, where they can contribute with no USC on their contribution.

Watch out for allocation rates (how much of your contribution is actually invested) and the annual management charge.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

SBarrett said:

They don't just take it for no reason, it is to pay the advisor. And the same can happen with a personal pension plan.

With a PRSA, the employer contributions are liable to USC. That would be the same if they gave you a pay rise to make personal contributions. Ask your employer to implement an executive (company paid) pension, where they can contribute with no USC on their contribution.

Watch out for allocation rates (how much of your contribution is actually invested) and the annual management charge.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

Click to expand...

Hi,

This is interesting. An executive pension plan does not seem to be an option - I suspect my employer realizes the tax advantages very well. What would the percentage they take out to pay the adviser be described as - is this the "allocation rate".

The broker I was dealing with said that I'd get a 100% allocation rate on the PPPs he was recommending. I wondered where he was getting commission from - and will ask about that.

Allocation rates and management fees are interlinked as part of the management fee pays for the advisor fee. If you get a higher allocation rate, chances are the management fee is higher.

Remember, the advisor has to be paid for the work he is doing. Your employer may have elected that the advisor is paid by commission, although in the case of a personal pension, it is your choice on how he is paid.

Also, for you to get 100% allocation, the advisor will be taking a lot of risk on his remuneration. Most commission contracts have a clawback period of 4-5 years, so if you stop contributions in that time, he has some of his money clawed back by the insurance company.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)