PRSA costs and employer contribution to other PRSA

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Tea-eis

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I’ve recently taken up a job in Ireland after decades abroad, and I’m struggling to understand how to get a PRSA (my first pension) up and running with my new employer, or to understand the charges associated with the PRSA they are offering me access to.

They are offering me access to a Zurich PRSA via a broker and the costs are listed as:
  • 95% allocation
  • 1% Annual management Charge
  • Initial Commission 1.5 X term to age 60, max 15%
  • Renewal commission 2% (2% of continuing annual contribution from year 2 onwards)
I understand the first two are the normal (albeit high!) charges for PRSAs, but, after much googling, I still can’t make head or tail of the other two charges, or whether I should be worried about them, since the PRSA rules do not seem to allow any other charges than the first 2 in the list.

I’m also trying to understand employer contributions to PRSAs. My employer offers a 5% contribution, but, frankly, I’d rather find a different PRSA that’s better value than the one offered. Is there any rule that says employees can direct their employer to pay the employer contribution to a different PRSA than the one the employer offers?

If there isn’t, is there a way I can preserve the benefit of the employer contribution into a different PRSA?

Sorry if all of this is very basic - you can probably tell I’m struggling to understand how this all works :)

Thanks all for any help.
 
it is not basic. Nothing basic with Irish pensions and language used. I fell deliberately made confusing by industry. Toothless , useless regulator doing nothing to improve it. Rant over.,

Are the 2nd two points commission paid by Zurich to broker?
 
I think the only issues with alternative prsa is the potential admin burden of multiple schemes for the employer. Some employers will allow others will not. Employer is obliged to have one scheme in place, they could say no to you wanting to use alternative. Ask HR.
 
If there's a Zurich Life PRSA Scheme through the employer there's nothing stopping you buying the PRSA (with lower costs) through a different intermediary/broker and 'adding' it to the scheme to facilitate salary deduction.

It doesn't make one iota of a difference to the employer but it might make an (up to) 5% charge on contribution difference to you on your and the employers payments to your pension.


Gerard

www.prsa.ie
 
Thanks for the responses, both, very helpful.

I spoke to the pensions authority, who were willing to spend the time with me, but took the position that their only mandate is to ensure that employers offer employees access to a PRSA and that HOW it is done (ie via broker or otherwise) is a matter for the Central Bank.

GSheehy, the person at the pensions authority was of the view that it would probably be very unreasonable to ask an employer who offers a Zurich PRSA through their broker to all employees to also pay into the same PRSA at Zurich sold by a different broker for various 'admin reasons', including that "sure if you were able to get a pension with 100% allocation, all the employees would want that too", which actually seemed a like a very good reason to allow it to me! I'm going to push this with the employer however, as it would a great solution for me - I'm ok with a Zurich PRSA, but I don't want to use their broker.

Overall, this PRSA thing is beginning to feel like a bit of a ruse. On the surface it looks very flexible and pro-consumer, but, in reality, I'm beginning to see that your employer gets to choose which PRSA you get, and also they seemingly get to choose the broker, and if you don't like their choices, you seemingly just have to go without employer contributions entirely. When I add that all the maximum charges seem to also be the minimum charges, it's beginning to feel like it's set up to benefit everyone in the chain except the customer.

Will report back if I find out more about whether the employer will pay into an existing Zurich PRSA without switching to their (expensive) broker.

Thanks again - I've learned a lot in the last 24 hours!
 
Will the employer pay in the 5% if you don't contribute ?
If so, you could set that up and then set up a second PRSA at a lower fee for your own contributions. You could fund this by direct debit, no need to involve your employer.
 
Tea-eis said:
pensions authority was of the view that it would probably be very unreasonable to ask an employer who offers a Zurich PRSA through their broker to all employees to also pay into the same PRSA at Zurich sold by a different broker for various 'admin reasons',
Click to expand...

There's no admin burden to employer. Application is submitted to Zurich Life through another intermediary, on better terms, and is added to the existing scheme so that contributions are collected on the same employer DDM.

If it's done execution only then the intermediary that's handling the transaction isn't going to descend on the company and try and change what's already in place by canvassing all employees and wasting employer time, as employees are entitled to time to meet the advisor and set the PRSA up.


Gerard

www.prsa.ie
 
Tea-eis said:
Overall, this PRSA thing is beginning to feel like a bit of a ruse. On the surface it looks very flexible and pro-consumer, but, in reality, I'm beginning to see that your employer gets to choose which PRSA you get, and also they seemingly get to choose the broker, and if you don't like their choices, you seemingly just have to go without employer contributions entirely. When I add that all the maximum charges seem to also be the minimum charges, it's beginning to feel like it's set up to benefit everyone in the chain except the customer.

Will report back if I find out more about whether the employer will pay into an existing Zurich PRSA without switching to their (expensive) broker.

Thanks again - I've learned a lot in the last 24 hours!
Click to expand...
It's not a ruse. Your employer is getting the employees to pay the advisor for setting up the PRSA. If they are offering a pension to their staff, they should pay for it, then you will get 100% allocation to your pension.

Tea-eis said:
I'm beginning to see that your employer gets to choose which PRSA you get, and also they seemingly get to choose the broker, and if you don't like their choices, you seemingly just have to go without employer contributions entirely.
Click to expand...
Yes, that's the way it works. You don't get to select pay day or the brand of tea bags in the canteen. Your employer has selected a broker to set up the scheme for them, which you are invite to be a member of. You are well within your rights to object to it but your employer is also fully entitled to reject the objection.

If they pay the fee for the running of the pension (which they should), there will be no issues.
 
Steven Barrett said:
It's not a ruse. Your employer is getting the employees to pay the advisor for setting up the PRSA. If they are offering a pension to their staff, they should pay for it, then you will get 100% allocation to your pension.


Yes, that's the way it works. You don't get to select pay day or the brand of tea bags in the canteen. Your employer has selected a broker to set up the scheme for them, which you are invite to be a member of. You are well within your rights to object to it but your employer is also fully entitled to reject the objection.

If they pay the fee for the running of the pension (which they should), there will be no issues.
Click to expand...
The broker is legally obliged to offer access to a PRSA. They don't care if it's good value or not (and possibly don't know if it is or isn't). They've gotten a broker to fulfil their obligations and even gone as far as to make an employer contribution, which is more than they're required to do.

@Tea-eis paying enough to get the employer contribution might still be worth paying the higher charges. You could then set up your own PRSA with lower costs for additional contributions
 
Thanks Steven and Forture, I appreciate your explanations and agree I was too hasty saying it's a "ruse" when, as you point out, all the players are acting in good faith and in accordance with the law.

On reflection, my frustration is that accessing the much-enhanced tax treatment for employer contributions has not been done in a neutral way by Government that enables the same flexibility that other PRSAs get. I don't accept that it is the employer's money and therefore they can do whatever they like with it, given that well over half of the contribution comes in the form of tax reliefs that are paid for by the exchequer. As I understand it, a key objective of PRSAs was to remove pensions from the aegis and lock-in of employees and put the power (and responsibility) in the hands of the pension holder, and this seems to undermine that.

Not a hill I'll die on though, and, I suspect more of an unintended consequence than a design.

Gsheehy, thanks for your advice. I've sent a message to them to ask if they'll do what you say.

All - thanks for your responses. The last 24 hours have been a rapid learning process for me and I appreciate it.
 
I had a similar situation with one employer. They offered a PRSA and were willing to make an employer contribution to it. Like you, there was 95% allocation rate, which I think is pretty poor. You're losing 5% of every monthly contribution. The PRSA legislation states that the commission can not be higher than 5%. So most brokers simply apply the max commission of 5%. I asked the employer if I could pick my own PRSA. Employer said that they wouldn't contribute to it if I chose a different one.

If your employer is making a contribution to the PRSA, then you should probably contribute the minimum to secure the employer contributions. As I understand it, you could then also take out an "AVC PRSA" and make additional contributions to that. If you take it out on an execution-only basis, you should be able to get 100% allocation and about a 1% AMC. You would need to apply for tax relief on these contributions yourself at the end of the year.

My understanding is that the original idea of the "AVC PRSA" was if the employer had an occupational pension scheme but didn't allow AVCs to it, then an employee could make the AVCs to an "AVC PRSA" and get tax relief on it. I believe that you can also use an "AVC PRSA" and claim tax relief on the contributions if your employer offers a PRSA (and technically does allow AVCs to the PRSA). But I am not 100% sure of this. I would like to hear the views of others.

Also, if you take out an "AVC PRSA", it is linked to your current employment. So if you change jobs, you need to stop contributing to the AVC PRSA as you would no longer be entitled to claim tax relief on the contributions.
 
Persius said:
I asked the employer if I could pick my own PRSA. Employer said that they wouldn't contribute to it if I chose a different one.
Click to expand...

What someone should ask is can I choose a PRSA with lower costs with the same PRSA Provider that the Letter of Appointment is in place with the company/employer already.

Persius said:
As I understand it, you could then also take out an "AVC PRSA"
Click to expand...

You wouldn't be doing an AVC PRSA as you're not a member of an occupational pension scheme. You'd be a member of a PRSA Scheme. There's a difference . You'd just set up a PRSA.


Gerard

www.prsa.ie
 
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