# Pension linked with Life Assurance



## Quiet man (10 Oct 2011)

Hi All
        For 17 of the last 20 years I have contributed £100 pw to a pension with Life assurance .It is forecast to provide me with 3K PA pension when I retire .There is a maturity age of 70 yrs with early withdrawal penalty before then .3 years ago I reduced my contribution to 25 Euro pm to keep the Life assurance Going (I was disappointed with pension ).I have asked for  full detains of charges and commisions but am told this is not possible.
Am I entitled to move my pension to a SSAP type pension but leave my Life Insurance where it is .


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## Baracuda (10 Oct 2011)

Just a couple of observations regarding your post. In the case of "fund inclusive" life cover; you need to be very careful with some of these older contracts as it is often a condition of the policy, that you must pay the premiums over the life of the pension i.e. if you make the pension "paid up" the life cover is removed from the pension. There may be a grace period of up to 24 months but you would need to specify that this is a "premium holiday". 

I have often noticed that when the life cover is built in to the pension contract the life cover cost is reviewable i.e. the cost of the cover increases as you get older so you might find that it is costing more thanthe €25 that it was costing 3 years ago!

The big problem that I find with life cover built in to the pension is that units are encashed every month to fund the cost of the life cover. This creates a problem when markets are down as more units are encashed to fund the life cover so when markets recover you have less units and hense the recovery of your pension is seriously handicaped as a result!

It is possible to work out the cost of providing the life cover but it would take an actuary to do this. The actuary would need to examin how many units was encashed each month and at what price the units were at that time. This is why the pension provider is refuseing to provide you with this information,it would simply cost them too much and they would not be able to recover this cost from you.

You would not be able to move the fund and retain the life cover.

Are you sure that it would be wise to move to a SSAP? These are usually used for pension funds of over 250K as a min. The admin costs of a SSAP for less than 250K as a % of the assets are usually higher than an equivalent insured self invested fund.


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## LDFerguson (11 Oct 2011)

I agree with Baracuda and would go further - as far as I'm concerned bundling reviewable cost life cover with a pension in the one premium should be banned, as the customer finds it very hard to establish how much s/he is paying for life cover at any given time and how much is actually going into the pension.  

While the provider may not be willing to give you a breakdown of historic charges, they certainly should give you detail on *current* charges.  Ask them for a breakdown of all the charges that apply right now.  When you get a reply, post it back here as the charges will undoubtedly be expressed in jargon but it can be translated here.  

Liam D. Ferguson


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## Quiet man (2 Nov 2011)

Hi,
   I have had a reply which says current charge per year is 1530 .Am I right to assume that this is the total yearly cost of this pension ?.
I paid in £5,000 per year for 17 years and the fund is worth 50k Euro approx,am I unlucky or is this par for the course for a Directors pension plan.when I started the pension I could have bought a good property and have the mortgage paid down by now (using my £100 contribution plus rent earned), and would have been much better off .Pension is estimated to give me 60 euro a week ,even in todays depresed property market I would be much better off had I gone the property route .
I think I might be better off closing this pension now ,transfer the money into a personal Retirement plan ,close it off so that costs are caped ,and start another Pension fund elsewhere.


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## Baracuda (2 Nov 2011)

Hi Quite man.

I hear and see what your saying when you compare your pension fund of 50K and buying a house but what you also need to consider is that you have had the benefit of life cover over this period and there would be a cost for providing the benefits. I refer you to my previous post on my thoughts on this type of cover and the reasons why this can be so expensive!

Could I ask how much life cover is provided by your pension and is the life cover "inclusive of exclusive of fund". I would be inclined to agree with your suggestion that it maybe an idea to stop contributions and open a new contract *but* I would need a lot more info before I would actually advise this. 

Usually a Statement of Reasonable Projection would be the best way of comparing different contracts but because you have life benefits built in to your contract it would be impossible to compare fairly

Your best bet is to seek professional advise and ask the advisor to write up a comparison between your existing contract and a new proposal and to include all charges e.g. bid/offer spread, allocation rate, contribution charge, AMC (is there dual charging structure for initial units and premium units), does the previous charges reduce as the fund grows, are there any bonus's, plan charge, policy fee's.
I would assume that the current charge per year is relating to the cost of the life cover only and would not include contribution charge or annual management charge.


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## Quiet man (3 Nov 2011)

Hi Baracuda
               Thanks for your reply.
Life cover is for 350K , I can maintain this by continuing to pay the 25 Euro per week .
If I convert the pension part into a personal retirment bond (close it off ) what charge could I expect to pay to a trustee company per year ?.


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## Baracuda (3 Nov 2011)

Sorry Qm, I should have also asked you your age and smoker status so I could have done a quick quote to compare cost of benefits (if you prefer to private message me with info thats okay). 

You should look into the merrits of removing the life cover from your existing pension and setting up a new and separte "company pension term assurance" i.e. life cover set up under pensions act where the company can claim tax relief on the premiums.

You should also look into the merrits of stopping the existing premiums and taking out a new Company Pension rather than taking out a Personal Pension/PRSA as the latter attracts USC and PRSI charges of upto 11% on each contribution. 

As you are still an employee/shareholder of the company you cannot transfer the value of the existing fund to a Buy Out Bond (irish life call it a PRB). It maybe worth while to transfer the existing pension into a new contract but very unlikely as you would have to pay exist penalties on the existing fund.

You cannot transfer the pension part and keep the life cover as this is part of the one contract so its all or nothing I'm afraid. 

If you are setting up a one member scheme the costs of prefessional trustee duties are usually borne by the pension provider but some charge €5.00 p.m. The following would be the average scale of charges 0% to 5 % monthly premium charge, 0.65% to 2% of fund AMC, €1.50 to €5.00 p.m. policy fee and €8.00 annually to pensions board. Fee's and charges vary from provider to provider and on the level of service and advice that you expect and need, so the less service that you require the less you should pay but it dosen't always work out like that so choose your pension provider very carefully!


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## Quiet man (4 Nov 2011)

Hi ,
It looks like I can keep the Life Assurance (cost 100 pm) and move the pension elsewhere .I am 50 ,so will not be due to retire for some time, that rules out the buy out bond. If I transfer the pension part I will incur a penalty (I would incur a penalty anyway if I retire before 70 it seems) but I think I am better off moving it as it has been so disapointing .Let alone property,the Dow Jones index increased by nearly 500% during my 17 yrs contributing (Pension returned minus 33%)
I dont wish to start a new company pension/Life Assurance at the moment as company is not making a profit .I would however intend to start a new pension in a year or two when things pick up.
If I move the Pension fund to a new Pension and close it off (not make any more contributions) what leval of fees might It incur for just trustee services on a closed off fund.


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## Baracuda (5 Nov 2011)

Quiet man said:


> Hi ,
> It looks like I can keep the Life Assurance (cost 100 pm) and move the pension elsewhere.


I would consider removing the life cover from the pension rather than removing the fund from the pension as the latter attracts exit penalities.

 You should be able to get the same level of cover for in or around the same price providing that you have always enjoyed good health and are a non smoker. The advantage of this is that the cost of the benefits would remain fixed for the next 20 years.



Quiet man said:


> If I transfer the pension part I will incur a penalty (I would incur a penalty anyway if I retire before 70 it seems) but I think I am better off moving it as it has been so disapointing.


 As the cost of life cover was deducted from the fund this has seriously impared the growth of the fund. I know that if you remove the benefits from the fund you should see more realistic returns. You should also be able to change funds to something that maybe more suitable to your growth expectations within the pension. 


Quiet man said:


> Let alone property,the Dow Jones index increased by nearly 500% during my 17 yrs contributing (Pension returned minus 33%).


 Hingsight is a cruel mistress isn't that what they say![/QUOTE] I just ran a check on the returns of an average managed fund and over this period they have returned c. 175% but of course managed funds supposedly have a lower risk ratio than ETF's. I have said in many of my posts here on AAM that investing in managed funds for a higher level of return is futile as managed funds rarely if ever beat an indexed fund, fact is that you are paying highter management costs for poorer return. 

The other thing a person needs to remember that the returns quoted above assumes that a person invested a single premium back in September 1994 in the Dow and this would have given a return of nearly 500%, fact is though when you invest in a pension fund you invest a premium once a month, your fund value is the average market price less management charges over the 17 years that you have been purchaceing units in that fund. 




Quiet man said:


> If I move the Pension fund to a new Pension and close it off (not make any more contributions) what leval of fees might It incur for just trustee services on a closed off fund.


 Some companies charge €5 per month and others do not charge, transfering funds would not incur any charge, about 1% management charge and c.€4 p.m. policy fee and €8 p.a. pension board fee


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