# I feel i should start a pension but have concerns...



## Sharky (26 Mar 2009)

I am almost 30 and looked strongly at a pension in 07 but decided against on the info i was given and the way i knew the country was going. Now it turns out it was a good move because i would lost money already. However i understand that you always have to look long term especially with a pension. My question is should everyone, like the government have told us through TV ads and everything take out a pension. My fear is that i am relying on a fund manager to do the right thing with my money when i am a small fish in a huge pond.......

I am a sceptic i suppose.......

I know the value of peoples pensions have taken a huge hit over the last year and if the fund managers were doing their jobs correctly this should not have happened, no........ especially to those who were close to maturity because the funds should have been put on relatively low risk funds?

I am just unsure if i trust any bank at the moment to do the right thing.

What financial institution has performed best and has the best track record for me to take on a PRSA? And should i still do it??

Thanks in advance for any help!


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## StevieC (27 Mar 2009)

Its still worth doing for the tax relief if you choose a secure fund until markets regain some form of normality. I'd look at a Gilt fund and just accept that the returns will cover the charges and maybe a little more and take the tax relief at your marginal tax rate.

My personal view is that Eagle Star have been the best pension provider recently based on charges, investment return and service awards won.


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## Sharky (6 Apr 2009)

Surprised that few people/ experts in this area have come back on this post. Are people afraid to tell things as they are? Am i the only one with these concerns? The lack of response makes me even more unsure


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## LDFerguson (6 Apr 2009)

Sharky said:


> I know the value of peoples pensions have taken a huge hit over the last year and if the fund managers were doing their jobs correctly this should not have happened, no........ especially to those who were close to maturity because the funds should have been put on relatively low risk funds?


 
Unless you chose a "lifestyle" fund where investors are grouped together in a fund with others of a similar age, the fund manager has no knowledge of what age investors in a fund are.  So they cannot make investment decisions based on investors' age.  

If a person is invested in a higher-risk fund, they should switch out of that fund as they approach retirement.


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## Sumatra (6 Apr 2009)

Don't be blind to opportunity! Personally, I think it is the most valuable opportunity in my lifetime to provide for retirement. The Irish are generally so conservative. Go for it use the safety net Liam mentioned and make a pension plan part of your provision for a worry free retirement. Hopefully there will still be exceptional tax benefits after tomorrow?


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## LDFerguson (6 Apr 2009)

Sharky said:


> Surprised that few people/ experts in this area have come back on this post. Are people afraid to tell things as they are? Am i the only one with these concerns? The lack of response makes me even more unsure


 
Stephen Cowan (StevieC) is a qualified and experienced life & pensions practitioner. He has given you his opinion for free. How many more experts would you like?


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## Sumatra (6 Apr 2009)

Liam is also excellent. I'll tip toe out of here


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## Sharky (8 Apr 2009)

God Liam dont burst a blood vessle there - relax!

Thanks for the replys and recommendations so far.

I actually thought the fund manager would have to know the age of customers and would advise them accordingly. The risk a 20 year can take on is very diffferent to that a 60 year old should take on? 

Also I thought you relied on the fund manager to move your money around and to do the best thing for each individual? 

That would be an extra worry for me then. The provider i choose do nothing for ME - MY PENSION - It is all just lumped together.

Also is it up to the average Joe to decide when it is best for him/her to move funds around when most people (me anyway) dont know this sort of info or have it to hand. I thought you relied on a professional maybe thats where we all went wrong relying on bankers (who are actually sales people when you strip away the excess)


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## StevieC (8 Apr 2009)

A sales person for an insurance company/bank will typically just sell a customer their default product. This product can or cannot have some age relevance in the product set up depending on the company.

Fund managers change the assets of funds not individuals. When you take out a policy you are put in a fund and your assets are managed the same way as everyone else in that fund. If you want someone to manage your fund individually, then you would be looking at paying an arm and a leg to set up a self administered fund where you/you and a broker decided the assets and asset movements. For a typical pension investor the charges are too high to justify this approach. If you have a fund worth millions then the charges as a percentage of the fund can justify this approach.

The pension provider provides you with an investment product that allows you to avail of tax relief. Thats the way to view pension products in my opinion. The investment growth generally comes over time, 20 to 30 years (pensions are a long term investment). Its an emotional issue at the moment because markets are so rough but its also an opportunity for those not close to retirement. 

My advice to anyone is find an honest independent broker and talk to them about your attitude to risk. If they do their job properly then there is a massive reduction in you being stuck in a fund thats not suitable for you.


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## North Star (8 Apr 2009)

Sharky, you have highlighted an issue that I believe many people are unaware of. 
If you have discretion over your pension investment strategy i.e you dont choose a lifestyle investment product then with that discretion over investment comes responsibility for the results of that investment strategy. Some advisers will work with clients over the long run to assist them in developing an investment strategy that suits their individual targetted returm/loss tolerance dynamic. Everyones situation is different.
Many advisers dont have the expertise or motivation to do this.
The fund managers only operate on the original mandate i.e if you select high yield equities - thats what they invest in, unless you instruct them to transfer into an alternative fund. 
The term mananged pension fund can be misunderstood, it can misleadingly give the impression that a fund manaager is actively reviewing your investments. In reality they act as you instruct them to act - to the best of their ability. If you choose a leveraged property fund, the fund manager has no discretion to move you from that fund into another option which he or she may believe to offer a better risk/return. 

Bottom line your choice is to a) take personal responsibility for your investment strategy/pension or b) if you need more market/investment knowledge choose an adviser who has the appropriate skills and is explicity prepared to work with you to deliver your pension objective.

Pensions are very important financial products, we all need to invest some of our time and effort to improve our prospects of having the pension we require when its needed. I dont mean this to appear as a lecture, but I think its an important point.

kind regards 

Vincent Digby
www.impartial.ie


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## peter murray (8 Apr 2009)

Hi Sharkey,

If your pension fund tanks once, that is a misfortune. If it tanks again and again, it might just be because the product is rubbish.

The experience over the last ten years is that Irish pension funds have repeatedly underperformed both the market generally, the inflation bench-mark, and safe interest bearing cash accounts, in particular. In fact the only thing that makes these high-cost low value products marketable at all is the tax-relief. Equity based pension-products are endowment mortgages in disguise, and for ordinary folks who need security, modest returns, and transparancy, similarly unfit for purpose. The reason why the industry and agents are so keen to flog them to the punters is because they provide a pretext for gambling on the stock market with your money, charging you exorbitant management-fees for doing so, and taking a chunk of the gains when they (almost never) win, while forcing you to shoulder all the losses when they (usually) lose.
If these people were subject to the same consumer protection legislation as other providers of goods and services and the banks were held liable for the fitness for purpose of their products and the actions and advice of the agents who sell these products, they would be withdrawn from the market in the morning.

You should see if you can get someone to provide a product which is invested in an interest-bearing cash account "tracked" indefinitely against the base rate. Sadly, no such product is currently available. AIB, PTSB and Eagle Star all have cash-based products, but the small print reveals that after a short initial come-on period when the interest rate is "tracked", they can reduce the return and force you to choose between a negative return or transfer into risky, high-charge equity-based funds.

Sorry, I don't have any better news.


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## North Star (8 Apr 2009)

Peter if you want your opinions to be seriously considered you have to provide evidence over a longer time frame than the last 10 years. Equity markets have all seriously underperformed in the last 10 years. This reflect on a particular asset class, not irish pension products. If your point is that irish pensions have too high an equity component, why not keep your point to that one issue?


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## DerKaiser (9 Apr 2009)

peter murray said:


> Equity based pension-products are endowment mortgages in disguise.


That is a very poor analogy. Endowment mortgages are based on investing rather than repaying debt. In general pensions do not involve this type of gearing and it is misleading to make the comparison



peter murray said:


> The reason why the industry and agents are so keen to flog them to the punters is because they provide a pretext for gambling on the stock market with your money, charging you exorbitant management-fees for doing so, and taking a chunk of the gains when they (almost never) win, while forcing you to shoulder all the losses when they (usually) lose.


 
I have pointed out to you elsewhere that you can shop around and easily find a pension where the only charge is 0.75% of fund per annum. About 0.15% of this covers the assets trading costs with the remainder covering administration costs such as compliance with regulations.

In the last two years, starting before the most serious equity market falls, brokers and pension providers were marketing guaranteed products very heavily. The people who took out these products have had an extremely good outcome thanks to foresight in the industry.



peter murray said:


> If these people were subject to the same consumer protection legislation as other providers of goods and services and the banks were held liable for the fitness for purpose of their products and the actions and advice of the agents who sell these products, they would be withdrawn from the market in the morning.


 
The pensions industry is one of the most successful models of where regulation has actually worked in this country. To suggest products that have been approved an accepted for years are not fit for purpose is being a bit dramatic (and cynically timed)



peter murray said:


> You should see if you can get someone to provide a product which is invested in an interest-bearing cash account "tracked" indefinitely against the base rate. Sadly, no such product is currently available. AIB, PTSB and Eagle Star all have cash-based products, but the small print reveals that after a short initial come-on period when the interest rate is "tracked".


 
These products offer an initial margin above ECB and thereafter match ECB. In any event investing in cash for 30 to 40 years is not a sound strategy viewed in the light of inflationary risk


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