# What type of pension arrangement if my employer does not offer a scheme?



## whytis (28 Mar 2014)

I'm employed (and I'm a company directory of another company, but that's a separate issue).

My employer doesn't offer any pension plan.

In order to start contributing towards my pension, is it a "personal pension" scheme I need to set up? Or a PRSA?

Please forgive the newbie question, I might not be asking exactly the right question.

My intention is to contribute towards my pension via a mix of ETFs that I would purchase through an online stockbroker account.


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## IrishRain (28 Mar 2014)

You can take out either.
Your employer is meant to offer you an employer prsa but does not have to contribute. Advantage is there should be a net pay facility so you get immediate tax relief.

Otherwise you can personally take out a prsa or personal pension. The prsa is more flexible particularly when you also are a company director as you could transfer the value into a future company scheme.

Main thing to consider is the charges. Prsa's are generally set at 5% of the premium and 1% management charge. Personal pensions can be lower but often have early encashment penalties.

Not sure what you mean about paying for it from efts. Both must be funded by relevant earnings if you want to get tax relief.


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## whytis (30 Mar 2014)

Much appreciated, Irish Rain.



IrishRain said:


> The prsa is more flexible particularly when you also are a company director as you could transfer the value into a future company scheme.



What would the advantage be of transferring the value from a PRSA into a future company scheme (presumably operated by the company for which I am a director)?



IrishRain said:


> Personal pensions can be lower but often have early encashment penalties.



The penalties would only apply if trying to take out money before retirement, correct?



IrishRain said:


> Not sure what you mean about paying for it from efts. Both must be funded by relevant earnings if you want to get tax relief.



I meant that I would be using relevant earnings to pay for index funds exposed by ETFs. However, the more I read, the less worthwhile chance I see of investing in diverse index funds, rather than paying for active management of funds from a life assurance company. I do see that those insurance companies also offer passively-managed funds.


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## IrishRain (31 Mar 2014)

1) The only real advantage to amalgamating a PRSA with a future Occupational Scheme is to have all funds together.  You may get better allocation rates/better fund choices with a higher fund.  

2) Every Company have different ways of recouping set up costs.  Most have an early encashment charge if surrendered or transferred in the first 5 years of the contract but some have charges if surrendered at any time before the maturity date.

3) Once you have a fund built up of about €20k you can invest in self invested funds which would give you access to stock broker accounts within your pension as well as unit linked funds. This option would not be available on PRSA's though. - Only Personal Pension.   

Main things to consider when taking out a pension would be how long you intend to pay into it.  If you are only planning to stay an employee for the next few years while you develop your own business then PRSA might be better for you as can change it to employer sponsored in time.

However if being a company director is only ever going to be a sideline and you want a pension that gives you the option of investing directly in Shares through a Stock broker account then a Personal Pension is more for you.

Other thing to consider is if there is any chance your employer might start up a pension for employees as again a PRSA might be better for short term investing then.


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## whytis (1 Apr 2014)

Glad I asked, thanks for the fantastic help, IrishRain.

In contrast to amalgamating funds, a pensions advisor spoke up the advantage to me of having two different pensions, both giving up to €200,000 (25% of total) in tax free drawings upon retirement (at the time of writing). Is that benefit something you'd include in your assessment of personal pension vs PRSA?

I'll also have to make sure that if I choose a personal pension that I will have the choice to move the funds to a PRSA after five years or more.

A PRSA would be beneficial in allowing me to move it towards my own company's scheme in time. After 5 years of paying into a personal pension, wouldn't I also have the same choice? (If the personal pensions company says up front that that is possible).

Thanks again. You've shown me that the choice is personal pension vs PRSA, and after my fund has reached €20,000 I will have perhaps greater control of what type of investment to access.


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## Steven Barrett (2 Apr 2014)

You need to talk to an advisor who knows the rules. 

You are allowed to take up to €200,000 as a tax-free lump sum. You can't split the pot and get it twice. Then everyone would be doing it. The only way of doing it would be to set up a pension for your wife. 

You'd be looking at a pension pot of €1.6m to avail of that anyway. 

When looking at a personal pension or PRSA, look at the charges and go for whichever is the cheapest. 

If you want to trade yourself, Standard Life have a self directed option which is reasonably priced. It is available through their personal pension and PRSA. 

You can transfer personal pensions into occupational pensions by routing them through a PRSA first. I've done it loads of times. 


Steven
www.bluewaterfp.ie


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## whytis (29 Apr 2014)

IrishRain said:


> 3) Once you have a fund built up of about €20k you can invest in self invested funds which would give you access to stock broker accounts within your pension as well as unit linked funds. This option would not be available on PRSA's though. - Only Personal Pension.



So to clarify, what option do company directors have in terms of accessing stock broker accounts for pensions? Is a Personal Pension with an insurance company the only choice? Apologies if I've misunderstood.


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## whytis (29 Apr 2014)

SBarrett said:


> When looking at a personal pension or PRSA, look at the charges and go for whichever is the cheapest.
> 
> Steven
> www.bluewaterfp.ie



I haven't studied costs, but from what I read personal pensions will generally work out cheaper, correct? From my interpretation then, you're leaning towards the personal pension in my situation.


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## Steven Barrett (1 May 2014)

whytis said:


> I haven't studied costs, but from what I read personal pensions will generally work out cheaper, correct? From my interpretation then, you're leaning towards the personal pension in my situation.



There is more scope under personal pensions. They may be cheaper but likewise, they may be more expensive. PRSA's are more structured and each charging structure has to be approved by The Pensions Board. 

There is always going to be a base cost for pensions that the life company will charge. The rest is based on how you pay your advisor e.g. you write him a cheque, the charges on the pension contract will be lower. 

You want to pay by commission, if you have a high allocation rate, the management charge will be higher. You want a low management charge, your allocation rate will be lower too. 

There are a lot of variables and choices out there. They should really just have 1 type of pension plan. 


Steven
www.bluewaterfp.ie


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## IrishRain (7 May 2014)

Been away so only noticing this now.
Your best bet is to talk to a financial adviser who will give you personal advise. You could ring around a few and see if you are happy with the service they offer.  Most just take the commission from the premium but some will charge an upfront fee.  It really depends on how much you are paying which is better.  i.e. if you are paying €200 per month and the broker is getting a % then that will be cheaper than paying a once off fee of a few hundred to a broker.  But if you are paying €2000 a month then obviously the upfront may be cheaper.

You will still pay a commission & charges if you go direct to the company.

Re Share dealing I was not aware it was available on some PRSAs through Insurance company but as SBarrett says it is on Standard Life. 
PRSA's generally charge 5% upfront (95% allocation) and 1% annual management charge.
You can generally get a personal pension with a higher allocation as there is more negotiation room on it.


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