# AVC's or PRSA, differences?



## ricta (22 Feb 2010)

Hi,
I am wondering whether I should invest in the AVC scheme provided as part of my occupational pension scheme or start a PRSA. The pension scheme AVC's have a 5% bid/offer spread and a .65% annual management fee, I'm told this means for €100 I pay in €97.85 gets invested. However there is only one fund manager (Irish Life) and only one fund, Indexed Global Equity.
If I started a PRSA I would have greater choice of managers and funds, but will I get equal or better charges?
Also, am I restricted, at retirement, to only being able to use 25% of the PRSA as a tax-free lump sum, while all of the AVC could be used? Are there special AVC PRSA's that allow 100% of the fund to be used to give the tax-free lump sum?

thanks in advance


----------



## LDFerguson (22 Feb 2010)

There are several discount brokers who will offer PRSAs at 100% allocation and 1% annual management charge, provided that you don't require advice.  

In itself, a 5% bid/offer spread doesn't mean that €97.85 out of €100 gets invested.  I suspect that your AVC provider is offering 103% allocation less 5% bid/offer spread, which works out at 97.85%.  

Depending on your age and contribution level, 97.85% and 0.65% per year might work out better value in the long run than 100% and 1%, as the difference between 0.65% and 1% applies every year and gets bigger as your fund does.  You'd have to look at like-for-like projections to establish this.

You can set up an AVC PRSA of your own choosing, and can therefore choose and change your own funds.  Rules on tax-free lump sums from AVC PRSAs are the same as AVCs.  You will, however, need to claim back your own tax & PRSI relief.  

Liam D. Ferguson


----------



## ricta (22 Feb 2010)

Thanks Liam,
I have 13 years to normal retirement and want to invest €500 p.m.. How would the plan I describe above compare to, say, Rabo's product, which has "Your upfront costs will be: 1.25%" and a 1% management fee. They don't mention Allocation % or bid/offer spread. I find it difficult to compare product costs.


----------



## LDFerguson (23 Feb 2010)

Rabo's PRSA offering is 98.75% allocation and 1% annual management charge, also without advice, so 100% allocation and 1% annual management charge is therefore better, all other things being equal.


----------



## Towger (23 Feb 2010)

Just to point out that due to a 'flaw' in the drafting of the Income Levy legislation. If your Employer contributes to the PRSA you will pay Income Levy on it. You dont on a AVC.


----------

