I put €1000 in a PRSA last October...it's only worth €940 now

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Nomoneynohoney

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I don't know much about pensions or investments, but at 28 years old, I thought last year was about time to start saving for retirement. I am self-employed, so I chose a PRSA from Zurich. I put €1k in it last October and chose the split of investments myself (probably my first mistake given my lack of investing knowledge). The initial statement at the start of the year showed my €1000 had increased to €1,035, which looked good.

However, a statement arrived today, and I was quite disappointed to see it's now only worth €940. I get the whole pandemic thing has devalued many investments, but it seems I would've been far better off just putting the grand under my mattress. I am wondering two things: 1) does this sound like a normal level of loss on an investment given the pandemic? 2) should I avoid putting any more money in it for the foreseeable future? I know saving for retirement is a good idea but it doesn't feel like it when your initial attempt at getting started results in such losses so quickly.
 
Did your broker explain that fluctuations in values will occur regularly in most funds? Did s/he explain risk and volatility to you and assess your own capacity for risk? My first port of call would be to go back to the broker for a refresher about these concepts.

Assuming that you're in a multi-asset fund with some exposure to equities, dips in value are perfectly normal from time to time and are to be expected. In 2008 the average Irish managed pension fund dropped in value by around 30%. It recovered strongly in subsequent years to a point that is far ahead of pre-2008 levels. The only people that lost money in 2008 were the people who cashed in when values dropped. Those that waited did very well in subsequent years. This is an example of a trend that repeats itself regularly. It's also an example of why you should consider moving to less volatile funds in the years approaching your retirement.

You're 28 and probably won't be accessing these funds for over 30 years. I wouldn't be getting too concerned about short-term fluctuations.
 
The MSCI World inex has risen from 2252 on 28 Oct 2019 to 2399 yesterday. Using that as a benchmark your €1,000 would have risen to €1,065. Of course we don't know what you invested in nor what fees you were charged.

While I agree with LDF above, its no harm for you to ask Zurich why your pot has fallen while markets have risen. It is a reasonable question and you should expect an answer.
 
Thanks for the replies so far. The funds I chose were a 50/50 split between "International equity" and "Dividend Growth". The losses I mentioned are before any fees were deducted. Seems the Dividend Growth part decreased from €500 to €413 so that was the biggest loss.
 
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That's perfectly normal behaviour. Your pot will not always increase. It can drop in value too. The value now is of little significance. Value at retirement is what is important. The money under your mattress will be worth a lot less at retirement. Keep adding to your pot. The earlier you add the more time it has to grow.
 
Coincidentally I moved my pension fund back to Zurich last December
And like you I checked the balance just before covid and my growth was 10%+
Checked it again in May and I was down 15%+
Got a statement in the post last week dated July and the balance was up a couple of hundred euros from the initial amount
Just checked today online and and its up 5%

Did you check online to see what your current balance is today??
 
01/10/2019 to 18/08/2020

Zurich Life International Equity is up 10.04% and Dividend Growth is down -16.12% - that's before 1% AMC and (probably) 5% contribution charge.

Agree with what Liam said above.
 
No contribution charges on this policy. It's execution-only so my broker can't give me advice on funds. Seems I picked terribly by choosing the Dividend Growth.
 
You selected two funds with the same risk rating - at 28 years of age I wouldn't beat myself up over that.

Do you still get a 6 when you go through this now?
 
Nomoneynohoney said:
Seems I picked terribly by choosing the Dividend Growth.
Click to expand...

I disagree strongly. You will only know whether you made good or bad choices when you are at, or close to retirement in about 30 years' time. Fluctuations in a very short space of time are irrelevant and should be ignored.
 
Nomoneynohoney said:
Seems I picked terribly by choosing the Dividend Growth.
Click to expand...
Dividend focused equity funds have been particularly badly impacted by the pandemic. I'm sure they will recover over time but I'm personally not a fan of these funds - I would stick with a broad global equity fund.

But the more important point is that equities are always volatile over the short term. Think of it as a boy walking up a hill with a yo-yo.
 
<quote>You will only know whether you made good or bad choices when you are at, or close to retirement in about 30 years' time. Fluctuations in a very short space of time are irrelevant and should be ignored.</quote>

Your perspective is helpful. To be honest, a big part of the problem I have here is not adopting the long-term investment mindset needed for a pension. I'm freaking myself out over what is probably a normal fluctuation.
 
Sarenco said:
I'm sure they will recover over time but I'm personally not a fan of these funds - I would stick with a broad global equity fund.
Click to expand...

Sorry for the probably obvious question but would sticking with a broad global equity fund simply just mean switching my fund allocation to 100% International Equity fund?
 
Is there any chance there's a transfer penalty on your policy? My Zurich policy had something like -5% in year 1, -4% in year 2 etc. so when I log in I see a transfer value that is a decent chunk less than the fund value?

Also are you getting any tax relief on the pension contibution? If you are you need to factor that into the pension vs. mattress calculation. If you €1000 in the pension really only cost you €500, then it being down to €940 would still represent 88% growth to-date. Even if you're not getting tax relief today, you will as you progress in your career which will completely change the math on this.

FWIW when I setup my Zurich pension I went with the following fund allocations, this basket is up about 13% in the last 16 months.
  • Prisma 5: 15% (fairly stable Zurich managed fund because pension advisor recommended it)
  • Prisma 6: 15% (pension advisor again)
  • Indexed TopTech 100 Fund: 30% (I work in tech and believe there is plenty of growth yet to come)
  • International Equity Fund: 30% (to get some broad global exposure)
  • 5★5 Europe Fund: 10% (to get a bit more broad European exposure given I live here)
 
Zenith63 said:
Is there any chance there's a transfer penalty on your policy? My Zurich policy had something like -5% in year 1, -4% in year 2 etc. so when I log in I see a transfer value that is a decent chunk less than the fund value?
Click to expand...

In the first post, the OP says it's a PRSA and a PRSA cannot have early exit penalties.
 
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