# Pension, PRSA, PRB and Mortgage Advice for Couple 10 years from Retirement



## Mechman (13 Sep 2020)

*Age:* 55
*Spouse’s/Partner's age:* 54

*Annual gross income from employment or profession:* 80,000 private sector
*Annual gross income of spouse: *28,000 private sector

*Monthly take-home pay : *6000 approx

*Type of employment: * Both in Private Sector

*In general are you:
(a) spending more than you earn, or
(b) saving?* Now moving to saving more having had a lot of spending over past 10 years referring house

*Rough estimate of value of home:* 350,000
*Amount outstanding on your mortgage: *58,000
*What interest rate are you paying?* 2.75% AIB, 1000 per month. 

*Other borrowings – car loans/personal loans etc:* Car 19,000, 2 and a half years remaining, 680 per month, Personal Loan for upgrades at home, 5,500, 2.5 years remaining, 260 per month

*Do you pay off your full credit card balance each month? *Yes

*Savings and investments: *90k in ARF and AMRF from previous employment 10 years ago. Currently starting a new job, so my previous pension scheme holds 110k approx. Not sure if these should be listed under this point, or the next Pension question. No other cash savings, all spare cash went into pension AVCs in general.

*Do you have a pension scheme?* Just moved employer, this question relates to what to do in this area. Previously had been maxing out AVCs to the 35% level employer/ employee, approx 2,300 per month. Wife contributes 200 per month to a scheme she has through her employer.Wife has about 40k in her PRSA.

*Do you own any investment or other property?* Yes, site which we will be selling for 55k approx, see further detail below.

*Ages of children:* None

*Life insurance: *150k on wife, none on myself, as I have had a health issue 10 years ago, so insurance is hard to come by at a sensible premium, I had life cover under previous company pension scheme so wasn't an issue.

*What specific question do you have or what issues are of concern to you?*

Couple of questions I could do with expert input on.

1. I will be receiving a severance package of around 25k from my last employment and I will be selling a piece of property for 55k, so I will have 80k available by the end of the year to invest, or to pay off loans. I had intended to clear off the car loan (4.9%), personal loan (7.9%), and mortgage (2.75%)with this cash and leave us debt free. Is that a sensible approach? I have been reading on here a while, and the general slant seems to be to pay off any higher interest loans? I wonder should I retain the mortgage and just invest the cash, as the interest rate is relatively low, but the appeal of total debt free status is strong.

2. After that, I need to start my pension contributions again. My new employer is in the construction field, and doesn't operate conventional pension schemes, mores the CIF site operative schemes. I would intend to contribute the full 35% allowed myself. I was looking at something like a Standard Zurich PRSA which allows AVCs. Would that be a sensible option? I can't figure out the difference in a PRSA and an AVC PRSA? I presumed both might allow AVCs? Or is it as blindingly obvious that one does and one doesn't? I know which funds I'd like to pick there, I was thinking about a split of the Performance 35% , Balanced 35% , 5*5 Global 15% and International Equities 15%. Are the low cost brokers the sensible route here, or can the normal brokers move and negotiate on fees?

3. I need to do something with the pension scheme monies from my last employer. I was thinking about a Zurich Personal Retirement Bond. I can't seem to find the fee structure and charges on it, am I right in saying there might be a 3% commission and 1% AMC on something like that? I would be thinking about the same fund choices for it as the PRSA. I presume this would then be inaccessible for 5 years. Again, same question on fees - as I know what funds I want to choose, is there a lower cost fee structure available?

Its just my wife and I, we don't have kids, and I was hoping we could from here on have a debt free existence, with a decent monthly amount of 2500 gross going to our pensions, we both will most likely work till 65, and we would then still have a fair disposable income left for discretionary spending.

Just wondering if anyone could input on our situation, and if I have left anything out, feel free to ask.

Thanks in advance.


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## moneymakeover (13 Sep 2020)

Makes perfect sense, pay down debt and you'll have an extra 2k or month? (You didn't say how much the mortgage costs per month)
You'll be able to max out your pension.
And you won't feel the next 10 years going by.
You should have a decent pension pot by then.


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## Mechman (13 Sep 2020)

moneymakeover said:


> Makes perfect sense, pay down debt and you'll have an extra 2k or month? (You didn't say how much the mortgage costs per month)
> You'll be able to max out your pension.
> And you won't feel the next 10 years going by.
> You should have a decent pension pot by then.


Mortgage is 1000 per month actually, so yes, I’d have 2k extra disposable income.


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## Mechman (11 Oct 2020)

Just bumping this, anyone else have any thoughts, or are all in agreement that clearing all my debt is the best option?


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## so-crates (12 Oct 2020)

I am going to guess you are wondering if anyone would recommend investing the €80k instead of paying off the debt? The question boils down to whether it would be worth it.
Roughly that boils down to any investment has to have a better return than the outstanding cost (interest) of your three loans. I think the numbers are something like this (apologies, this is very, very rough, it is worth sitting down and working out the cost properly):
Remaining mortgage cost: €4000 (over about 5 years?)
Remaining car loan cost: €1000 (over 2.5 years)
Remaining personal loan cost: € 500 (over 2.5 years)

So the return on your 80k over 5 years needs to be at least €5500 for you to break even on not clearing the loans. If you invest your extra disposable income, it would have to be even higher.


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## Sarenco (12 Oct 2020)

Mechman said:


> I had intended to clear off the car loan (4.9%), personal loan (7.9%), and mortgage (2.75%)with this cash and leave us debt free. Is that a sensible approach?


Yes, that is the sensible approach.

Our tax code is such that it rarely makes sense to invest after-tax savings while carrying debt.


Mechman said:


> I was looking at something like a Standard Zurich PRSA which allows AVCs. Would that be a sensible option?


Yes, that works. 

You could start a standard PRSA with a discount broker with 100% allocation and 1% AMC.

Alternatively, you could use a broker to set up a personal pension.


Mechman said:


> I know which funds I'd like to pick there, I was thinking about a split of the Performance 35% , Balanced 35% , 5*5 Global 15% and International Equities 15%.


That allocation doesn't really make sense as there is considerable overlap between the funds' holdings. 

From that list, the Balanced Fund probably has roughly the right allocation for your age and circumstances.


Mechman said:


> I need to do something with the pension scheme monies from my last employer.


Is there a compelling reason not to leave it alone?


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## Mechman (7 Nov 2020)

so-crates said:


> I am going to guess you are wondering if anyone would recommend investing the €80k instead of paying off the debt? The question boils down to whether it would be worth it.
> Roughly that boils down to any investment has to have a better return than the outstanding cost (interest) of your three loans. I think the numbers are something like this (apologies, this is very, very rough, it is worth sitting down and working out the cost properly):
> Remaining mortgage cost: €4000 (over about 5 years?)
> Remaining car loan cost: €1000 (over 2.5 years)
> ...



Thank you !



Sarenco said:


> Yes, that is the sensible approach.
> 
> Our tax code is such that it rarely makes sense to invest after-tax savings while carrying debt.
> 
> ...



Just noticed that there's definitely some overlap on those funds. I better change that.

Only reason I moved my pension from the last company was to put it all under the one roof with Zurich as a buyout bond. Maybe that was unwise then?


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## Mechman (11 Jun 2021)

Hi again.

Im just about to complete that site sale. Our mortgage is in two parts, one which will be paid off in April 2025, is 730 per month. the other, paid off in June 2030 is 270 per month. Both are around 25k.

I'll have 50k available from the site sale. 

Im wondering would there be any sense in paying off the larger monthlies and retaining 25k in cash savings, or even as an investment? Rate is 2.75% with AIB. We don't have any cash savings currently, so would this be prudent? The cash would still be there to clear the mortgage balance in the event of any issues? 

Any thoughts?


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## Gordon Gekko (11 Jun 2021)

The answer’s the same as it was last year…clear your debts!

It’s almost as if you don’t want to 

The phrase “no brainer” is done to death but this is a no-brainer


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## Familyman77 (11 Jun 2021)

I see you mentioned the CIF pension scheme. Just to note if it's the CWPS scheme that comes with a death in service benefit of 100k


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