# Are pension funds 'safe'?



## Compass (15 Oct 2008)

Yes, I am aware that the value of pension funds may rise and fall but are they on the whole 'safe', partic. in current climate? What happens to my pension funds if the company managing them goes out of business?


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## therock (15 Oct 2008)

In the current climate, no they aint imo...stick it in a high interest bank account...yes you mightn't get to retire to Monaco with that option, but at least there won't be the danger of having it all wiped away because some stock broker made a bad decision.


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## johnnygman (15 Oct 2008)

therock said:


> In the current climate, no they aint imo...stick it in a high interest bank account...yes you mightn't get to retire to Monaco with that option, but at least there won't be the danger of having it all wiped away because some stock broker made a bad decision.


 

Great taxation advice there, 

reason for not following the above:
23% dirt tax on deposit accounts. v pension growth not taxable.
No tax relief available on regular savings or deposit accounts v full tax relief avail to pension contributions.

Fund choice's can range from deposit funds to market based funds.
Understand and evaluate which is right for you based on your appetite to risk.

do some research yourself if you are unsure or seek independant advice do not make investment or pension advice from someone with a chip on their shoulder against banks/broker or pension fund managers.
You will be counting the cost this for the duration of your retirement.

No offence therock but you should be careful how you advise people based on your opinions, try using facts to guide people who are unsure instead of ludicrous illustrations of Monaco retiree's
I am not the biggest believer in banks or pension funds but it has to be said they can be useful for a person funding for retirement if set up correctly and understood.


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## therock (15 Oct 2008)

johnnygman said:


> Great taxation advice there,
> 
> reason for not following the above:
> 23% dirt tax on deposit accounts. v pension growth not taxable.
> ...



If your pension declines over 41% in the year, then it doesn't matter what tax relief you received, you will still be at a loss. In the current climate, over the next year, with no-one knowing the extent of the subprime mess, can you say for certain that pensions won't decline by 41%.

Most people aren't as up with as you re options to invest their pensions and go for the high stakes stock markets believing it will make them rich. big mistake imo.

I don't have a chip on my shoulder re banks. I suspended my PRSA earlier in the year thank god. No offense taken and I was relying on the facts that the bank stocks have gone into freefall. I agree that people should make up their own minds, but they should make up their minds from the standpoint of having an informed opinion. So I would encourage people to weigh up the facts and then make their decision.


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## LDFerguson (15 Oct 2008)

See here.


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## Galway5 (15 Oct 2008)

Hi Compass, certain pension providers allow you to keep funds on deposit. These are different to the life assurance companies and should the company go bust the funds are still protected because the funds are held in trust for the individual.

Just after seeing LDFerguson's post and agree totally with his thinking.


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## DerKaiser (15 Oct 2008)

therock said:


> If your pension declines over 41% in the year, then it doesn't matter what tax relief you received, you will still be at a loss. In the current climate, over the next year, with no-one knowing the extent of the subprime mess, can you say for certain that pensions won't decline by 41%.
> 
> Most people aren't as up with as you re options to invest their pensions and go for the high stakes stock markets believing it will make them rich. big mistake imo.
> 
> I don't have a chip on my shoulder re banks. I suspended my PRSA earlier in the year thank god. No offense taken and I was relying on the facts that the bank stocks have gone into freefall. I agree that people should make up their own minds, but they should make up their minds from the standpoint of having an informed opinion. So I would encourage people to weigh up the facts and then make their decision.


 You're missing the point that you can invest in safe funds through a pension.


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## Compass (16 Oct 2008)

Thanks  - I guess I am looking at a PRSA as a long term savings scheme. I see guarantees for deposit savings in banks and wondering what can happen if the company running my pension scheme goes bust. I understand the value rises and falls etc. but can I lose the lot?
Reading above - if it's in a deposit, it's safe and if it's placed in equities, it might not be - is that a correct interpretation?


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## therock (16 Oct 2008)

DerKaiser said:


> You're missing the point that you can invest in safe funds through a pension.



I agree with you, you can...ok when I was filling out my PRSA form, you were given various options....

here they are from what i can remember, and this is just a rough guide..

option 1 - low risk

option 2 - medium risk 

option 3 mid/high risk

option 4 - high risk


The advice I was given was to pick the mid/high risk option as potentially there was a greater return...so I chose the mid/high risk option...A lot of people choose this option because human nature being as it is, you want to get the most return..

So following on from this my fund manager put my money in stocks as that's what I chose, as most average people chose...And that's why most people are suffering...

I suppose if people are starting a PRSA now they should like you say go for the safe option due to the changing times.


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## johnnygman (16 Oct 2008)

therock said:


> I agree with you, you can...ok when I was filling out my PRSA form, you were given various options....
> 
> here they are from what i can remember, and this is just a rough guide..
> 
> ...


 
You can switch your fund to a cash/deposit fund if you wish, you can either redirect all future contributions to this cash fund and leave the current value invested in the markets, or switch your current holding and all future premiums to the cash fund. 
This way at least if your unhappy with investing any further into the markets you can still claim your tax relief and not have to fret about markets going up or down if this is your main concern...


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## Compass (16 Oct 2008)

johnnygman said:


> This way at least if your unhappy with investing any further into the markets you can still claim your tax relief and not have to fret about markets going up or down if this is your main concern...


 
No, markets going & down is not my concern .. that's part of the deal. My concern is what happens if the company managing my funds goes out of business. Do I lose everything? Seems like a simple question!


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## Galway5 (16 Oct 2008)

Depending on the company holding your "fund", it may or may not be at risk. I think Life assurance companies hold individuals "funds" as a liability owed to you. So if they go wallop, then your "funds" are potentially at risk. I think this is covered by the investor compensation act though for amounts up to €20k. Check the financial regulators website for more info. www.itsyourmoney.ie


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## jetuohy (21 Oct 2008)

What was Average % performance of Irish Pension Funds in 2007 (and 2006?)
JT


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## Prudence (29 Nov 2008)

I want to follow up on the original query by Compass. The Investor Compensation Scheme covers 90% up to €20,000 invested with companies that are part of the Scheme (which most are, as far as I can see). But PRSAs (and other pension funds and unit-linked investments) pass €20,000 fairly fast.  So is it a good idea to start a new PRSA at a new company when the value gets very much higher than €20,000 (until you run out of possibilities!). This would be very cumbersome, of course, and you would have to balance safety with convenience and the likelihood of a worst case scenario.  

My other query is whether pension/unit-linked funds related to those banks covered by the Irish government's guarantee (I guess that would be Bank of Ireland, AIB and Irish Life and Permanent) are guaranteed without limit for two years. 

Like Compass I am not referring to the return or the value of the funds, which of course can vary. I am only referring to what happens if the fund provider goes bust.


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## upport (30 Nov 2008)

Prudence said:


> My other query is whether pension/unit-linked funds related to those banks covered by the Irish government's guarantee (I guess that would be Bank of Ireland, AIB and Irish Life and Permanent) are guaranteed without limit for two years.
> 
> Like Compass I am not referring to the return or the value of the funds, which of course can vary. I am only referring to what happens if the fund provider goes bust.


 
The Irish Life Safe Deposit Fund,available through their Performance PRSA is invested in PTSB and is covered 100% by the Government guarantee.


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