# Trying to sort out a pension



## paulhynes (15 Jan 2022)

I have an old pension from a previous employer. There is X amount in it. Not very much anyway.

My new employer does not provide a pension scheme / contributions. I see from Google that they must provide me with access to a PRSA but they don't have to contribute. They simply need to facilitate payroll deductions etc.

What are the benefits to going down the PRSA route through my employer vs setting up a PRSA myself and just managing everything myself?

Thanks very much


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## bstop (15 Jan 2022)

If you set it up yourself you could arrange it with an execution only broker and avail of lower fees. If you get the employer to set it up you could end up with an allocation rate of only 95%. This means that for every 100 euro contribution only 95 euro would be invested into your PRSA.
If you set it up yourself you will have to claim the tax refunds.
If it is set up as a deduction from your wages the tax relief is at source  i.e. automatically given at each wages payment.
Setting it up and managing it yourself will allow you to learn how it works and you will be it a better position to adapt to any changes in the future. I would always recommend keeping a regular check on the performance of the PRSA. This way you can judge if you should raise or lower your risk rating.


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## Dave Vanian (17 Jan 2022)

bstop said:


> I would always recommend keeping a regular check on the performance of the PRSA. This way you can judge if you should raise or lower your risk rating.



How would that work?  Let's take an example of someone in their 30s who is paying into a PRSA.  They get statements every six months, which show them the past performance of their PRSA funds.  In what circumstances do you think they should raise or lower their risk rating?


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## bstop (17 Jan 2022)

Well for instance if in the first 5 years the funds have performed very well and there is an overall gain of 50% I might consider increasing my risk level. If the funds dropped 50% in the same period I might consider decreasing my risk level. If you are lucky enough to have large gains in the early stages you can then afford to take on more risk.


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## ClubMan (17 Jan 2022)

Sounds like trying to time the market which isn't a great way to do things.


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## bstop (17 Jan 2022)

I would call it active investment.


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## Sarenco (17 Jan 2022)

bstop said:


> I would call it active investment


I would call it illogical.

By decreasing your risk level after a market fall, you are essentially locking in losses.


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## ClubMan (17 Jan 2022)

bstop said:


> I would call it active investment.


Which attempts to time the market and racks up higher transaction costs than a sensible passive investment strategy.


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## bstop (17 Jan 2022)

Losses and Gains are only "locked in" if the existing units are sold off.
The choice of new units purchased in any PRSA I have seen can be changed regularly without incurring any extra costs. The risk level can be adjusted by choosing to buy future units at a higher or lower risk level.


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## Sarenco (17 Jan 2022)

bstop said:


> The risk level can be adjusted by choosing to buy future units at a higher or lower risk level.


It really makes no difference how you adjust your portfolio allocation.  

Either way you are reducing your exposure to risk assets after a market fall and you are therefor reducing the extent to which you would benefit from any subsequent upswing.


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## Dave Vanian (18 Jan 2022)

bstop said:


> Losses and Gains are only "locked in" if the existing units are sold off.
> The choice of new units purchased in any PRSA I have seen can be changed regularly without incurring any extra costs. The risk level can be adjusted by choosing to buy future units at a higher or lower risk level.



So in the event of a drop in values, you're not advising that existing units should be sold, to switch to lower-risk funds.  But you are advising that future contributions would be redirected into lower-risk funds.  

So the price of a higher-risk fund drops, meaning that you could buy more units at the reduced price with future contributions.  But you're suggesting that one should switch to a different, lower-risk fund instead.  

I fail to see the potential benefit if someone does this.


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## bstop (18 Jan 2022)

I have not advised or suggested anything. You asked a question and I gave an example of a hypothetical situation and what I might do. I might also do the exact opposite.
My attitude to risk is my business. I am not interested in getting into a time wasting discussion on PRSA investment strategy with you.


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## TheGoodTheBad (19 Jan 2022)

bstop said:


> If you set it up yourself you could arrange it with an execution only broker and avail of lower fees.


I read regularly on here about going for execution only for a lower fee, and while this might be a reason to do your own Prsa, please be aware that while charges are less, if you don't know what you are doing you are Not going to get the result you want/need. You are planning for your future and I don't think that should be left up to chance especially if you don't know what you are doing. 



bstop said:


> Well for instance if in the first 5 years the funds have performed very well and there is an overall gain of 50% I might consider increasing my risk level. If the funds dropped 50% in the same period I might consider decreasing my risk level. If you are lucky enough to have large gains in the early stages you can then afford to take on more risk.


This example, for me, shows why going for execution only and getting a lower AMC isn't the most important thing and people should think hard before listening to that advice. Yes if you feel comfortable and can do it yourself by all means do, but I would say the majority of people cant and so Shouldn't. 
Paying a higher AMC and getting sound advice is much better than someone paying less fees but just taking a stab in the dark. 
Good advice is worth it's weight in gold or maybe more specifically worth the higher AMC. 

Too often people do follow the above strategy of when markets drop to then move to low Risk to secure their funds(not because you have said it, but because it is the natural instinct for most and it feels the right thing to do) however in reality it is opposite. Most of the time people are too late and have already missed the fall, and by moving into a low Risk fund all they do is just miss the rise then as well.


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## Conan (19 Jan 2022)

I remember back in early 2009 during the Financial crash, Equity markets had fallen c35% in 2008 and the biggest drawdown from Equities into Cash was February & March 2009. Had those clients stayed the course they would have recovered their losses over the following 18 months. So those investors suffered the fall in markets but missed the bounce.


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## Steven Barrett (19 Jan 2022)




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## Steven Barrett (19 Jan 2022)

I don't get bstops strategy. Most standard PRSAs are in multi asset funds anyway, which reduce their exposure based on volatility anyway. For example, the Zurich Life Performance fund has an equity range of 65% - 90%. It is currently at 84%. If you are worried about volatility, just stick it in one of those funds and let the professionals look after it and you manage your business. 


Steven
www.bluewaterfp.ie


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## bstop (20 Jan 2022)

Steven Barrett said:


> I don't get bstops strategy.
> 
> 
> Steven
> www.bluewaterfp.ie


The poster asked what were the benefits of setting up and managing the PRSA himself. I answered and told him that it was a good idea to do this as it would allow him to learn how it works and any knowledge gained would be to his benefit.
My strategy was to hold my PRSA and now my ARF in 100% equities. I am happy with this risk level but the poster might not be happy with this risk level and as his financial situation changes over the years he might wish to adjust his either up or down.
I don't agree with your "let the professionals look after it and you manage your business" approach.
By keeping a close watch on my ARF in early 2020 and seeing the massive losses caused by Covid, I was able to make a decision to suspend monthly drawdowns and then restart them mid year after the spectacular recovery. This decision prevented excessive depletion of my units and saved me from a loss of a few thousand euro.
This is an example of why I recommended that the poster should keep a regular watch on his PRSA.
My strategy is to be knowledgeable about finance and investment and to avoid the need to pay a Financial Adviser to tell me to leave it to the professionals and get on with my business.


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## Gordon Gekko (20 Jan 2022)

bstop said:


> By keeping a close watch on my ARF in early 2020 and seeing the massive losses caused by Covid, I was able to make a decision to suspend monthly drawdowns and then restart them mid year after the spectacular recovery. This decision prevented excessive depletion of my units and saved me from a loss of a few thousand euro.
> This is an example of why I recommended that the poster should keep a regular watch on his PRSA.
> My strategy is to be knowledgeable about finance and investment and to avoid the need to pay a Financial Adviser to tell me to leave it to the professionals an get on with my business.


With respect, your strategy makes no sense at all. It’s penny-wise and pound-foolish. The secret to successful pension investment is NOT to keep a regular watch. It’s gas how people who’d hire a professional to hang their curtains feel qualified to manage large sums of money.


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## bstop (20 Jan 2022)

I always hang my own curtains Gordon. I would agree with you that people who can't hang curtains should hire a Financial Adviser.


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## Gordon Gekko (20 Jan 2022)

bstop said:


> I always hang my own curtains Gordon. I would agree with you that people who can't hang curtains should hire a Financial Adviser.


It’s an analogy.

I consider myself reasonably knowledgeable in relation to financial matters. Yet I’ve no involvement in the day to day running of my pension monies, nor do I want it. I don’t even check the value.


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## moneymakeover (20 Jan 2022)

Gordon Gekko said:


> It’s an analogy.
> 
> I consider myself reasonably knowledgeable in relation to financial matters. Yet I’ve no involvement in the day to day running of my pension monies, nor do I want it. I don’t even check the value.


Do you know how's it's allocated?
And who decided the allocation?


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## Gordon Gekko (20 Jan 2022)

moneymakeover said:


> Do you know how's it's allocated?
> And who decided the allocation?


Yep, it’s 100% in global equities.

I did.

I’m sure it’s down this year, but I haven’t looked.


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## moneymakeover (20 Jan 2022)

Gordon Gekko said:


> Yep, it’s 100% in global equities.
> 
> I did.


Same as bstop


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## Sarenco (21 Jan 2022)

moneymakeover said:


> Same as bstop


Hardly.

Bstop told us that he keeps a close eye on his portfolio and reacts to market movements.


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## bstop (21 Jan 2022)

Gordon Gekko said:


> I consider myself reasonably knowledgeable in relation to financial matters. Yet I’ve no involvement in the day to day running of my pension monies, nor do I want it. I don’t even check the value.


Over the years managing my PRSA and paying in by lump sums, I have on occasions bought on dips and avoided buying at peaks.
I have remained in 100% equities in the same unit fund since the start. I reckon I have performed better using this strategy than by blindly paying by the month. 2020 was a roller-coaster and it certainly paid off to monitor my ARF and manage it as I did.
With respect my strategy makes perfect sense.


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## ClubMan (21 Jan 2022)

bstop said:


> I have on occasions bought on dips and avoided buying at peaks.


And on other occasions?
With respect, trying to time the market is a mug's game.
You can get lucky sometimes but it'll revert to the mean over time.
With a pension, or any medium/long term investment, it's time in the market, not timing the market that matters.


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## Dave Vanian (21 Jan 2022)

bstop said:


> I have not advised or suggested anything.



Haven't you?  



bstop said:


> I would always recommend keeping a regular check on the performance of the PRSA. This way you can judge if you should raise or lower your risk rating.





bstop said:


> Well for instance if in the first 5 years the funds have performed very well and there is an overall gain of 50% I might consider increasing my risk level.



If you still think that "increasing your risk level" *after* a period where your funds have performed well is a good strategy, even when various other posters here have explained the various reasons why that's demonstrably not a smart thing to do at all and will inevitably lose you more money in the long term than you can hope to gain, then I'll have to leave you to follow your market timing strategies and wish you well.


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## moneymakeover (21 Jan 2022)

There is a strong feeling that the market can't be timed and it's a popular to post this point of view.

However, aside from 100% equities is it possible to anticipate poor *bond* returns?
Stock market drop USA then assume *emerging markets* will do poorly?

Those are typical pension allocations which can be chopped and changed?


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## ClubMan (21 Jan 2022)

moneymakeover said:


> There is a strong feeling that the market can't be timed and it's a popular to post this point of view.


It's not a point of view.
It's a fact that nobody can predict the future.
If you disagree then I'm pretty sure that that James Randi $1M is still available for the taking.


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