# Occupational Pension - High Risk Investments



## flossie (8 Sep 2011)

Very quick question, i managed to get my company to setup an occupational pension (thanks for previous information Baracuda) which is just about complete. Funds from my PRSA will transfer across soon.

Been having a look over how to split my funds....i get the general impression that as i have 30+ years to retirement, i should be 'OK' to invest in higher risk returns. My PRSA was currently split 85/15 between 2 high risk funds. I'm wondering whether to keep this set up in place, or should i do some more splits, spread the funds over say 5 different funds?

I am on a Zurich pension. 29 years old, company contribute 8% and i contribute 7% at the moment. Plan to keep putting in maximum available amounts for the forseeable future.


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## Baracuda (12 Sep 2011)

Personally I would leave the PRSA as is and not transfer the value, why I hear you ask? Your PRSA can be drawn down at any age over the age of 60 using current regulations where as your Occ pension has a set retirement date. So lets say that when you turn 60 you decide to retire you can surrender the PRSA and get your TFLS where as if you transfer the value into the scheme you will have to wait till normal retirement age. There are also other reasons as well to consider such as personal estate planning where this would be good idea.

I would take it that the pension's advisor advised you which funds were most suitable for your risk tolerance. I assume that you have a high risk to reward tolerance. The question that you ask is incomplete as we could advice you too go ahead and invest in up to 5 high risk funds, but what if there are all equity funds that are similar! My opinion on this subject (this is not advice) is to invest in a range of different assets such as a main equity index, emerging markets equity index, commodites index and bond index and perhaps property (UK property up about 5%YTD but there maybe trouble ahead) The % to invest in each of the above should be reviewed yearly especially as you get closer to retirement! 

Just that you know that while Zurich managed funds performance has been exceptional in the past, it gives little indication to how it may perform in the future, it is also worth noting that managed funds rarely if ever, outperform the index that they are benchmarked against, managed funds usually have higher AMC than indexed funds so my advice this time is to invest in indexed funds and save money in charges and get the true market return!


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## flossie (12 Sep 2011)

Baracuda,

As ever, great advice - thank you so much. 

To be honest, my pension advisor hasn't been in touch. I got notification from my HR department last week that they had finalised the changover. Nothing has been mentioned as to fixed retirement date etc. This is not the first time i have received lack of communications!

In terms of risk i feel that as i am still in my 20s i can tolerate the high risks for a while....as i mentioned in other threads, i am still very confused about pensions, but i feel that as i have 30+ years to retirement i can afford to high risk for a while.....and gradually wind things down to lower risks as i get older. I like the idea of investing in different aqssets.....when the pension advisor (eventually!) gets in touch i shall discuss this further with them. Out of interest, if i am not happy with the attitude of the advisor can i ask to change them? 

In terms of estate planning, i am guessing that you mean if i pass away it is the way the monies go into my estate? I am looking into making my will this year (eek! ) so would be interesting to see how this has an impact. 

This situation is a pain as i am the only employee in Ireland to be in this situation. As my HR department are overseas they don't understand the situation too well. It's frustrating!


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## Baracuda (12 Sep 2011)

> Out of interest, if i am not happy with the attitude of the advisor can i ask to change them?


If your employer has chosen a corporate pension provider then the answer is no as the account manager is chosen by your employer. If you had a say and it the pension is a one member scheme then you may have a say to some extent.


> In terms of estate planning, i am guessing that you mean if i pass away it is the way the monies go into my estate?


 Yes the value of the pension is paid to your estate taxfree if you die in service, PRSA's are treated the same until you decide to take benefits. In the case of benefits being drawn, the value of of an AMRF/ARF is subject to inheritance tax rules, or if you are married the AMRF/ARF is transfered to your husband as a ARF and he would be liable to income tax. So you could draw down benefits from Occ pension and this would be subject tax in the event of death but if you leave the PRSA and do not take benefits and you were to die before your 75th birthday, the value would be passed onto your estate taxfree. 

By the way I assume that your employers DB scheme provides Death in Service benefits...make sure that you get this added onto your DC scheme if the DB scheme members have this benefit!


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## flossie (13 Sep 2011)

Thanks again Baracuda....

In terms of death in service i receive 4.5 x my salary to my estate (just realised i have left my ex as a benificiary on that, must change it! ) and when i came back to Ireland this remained the same (it's written into my emplyment contract).

Interesting about the PRSA benefit to the estate. As i currently have no dependents (other than a dog!) my estate is to be passed to my parents, guessing the rules you listed above apply here too. 

I think I will request a meeting with the pension advisor, get them to come out and visit me one evening and double/triple check i understand everything.

Thanks once again, i only hope i can provide some assistance to you one day 

Floss.


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