# Best Rates for High-Risk AVCs



## darraghdog (18 May 2005)

I am looking at making High - Risk (All Equity) AVCs to my pension plan. As an investment I am making this solely due to the tax breaks. My company is offering a deal on this, and I would like to ask if there are better value all-equity funds on the market.

The following are the choices I have and there are no intial costs on payment :
Eagle Star Dynamic Fund (mgmt. fee p/a .55%)
Irish Life Global Access Equity Fund (mgmt. fee p/a .9%)
KBC Asset Management Top Picks Fund (mgmt. fee p/a .61%)
KBC Asset Management Total Equity Fund (mgmt. fee p/a .61%)


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## ClubMan (18 May 2005)

Are there definitely no other charges that apply? Those management fees seem quite competitive.


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## deadlyduck (18 May 2005)

Darraghdog,

You should check the percentage allocation of your premium (this refers to how much of your premium is invested ; it's usually 95% or higher) as well as the percentage management charge. The management charges you quote seem good. I'm paying 1% management charge and receive 98% allocation. Perhaps your allocation rate is lower?


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## darraghdog (18 May 2005)

I am currently verifying that these are the only charges before I invest... I think they are but just want to make sure.
The asset allocation is between 94% (Eagle Star) and 99% (KBC). I didn't realy think asset allocation would be a factor in the performance (?)

By the way deadly duck, did you get that deal thro an employer or on the market, and if it's on the market could you give me the details ? ... just in case my employers offer is not what it seems I would be interested to know


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## ClubMan (18 May 2005)

darraghdog said:
			
		

> The asset allocation is between 94% (Eagle Star) and 99% (KBC). I didn't realy think asset allocation would be a factor in the performance (?)



What do you mean by asset allocation? The maximum amount invested in equities or something else? The more that's invested in equities then (most likely) the higher the risk/reward profile so this might be expected to have a bearing on performance going forward. If you actually mean the allocation rate then note that an allocation rate of 94% means that 6% of your contribution disappears in charges and you have to earn this back before you are even breakeven.


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## darraghdog (18 May 2005)

Apologies.. I'm relatively new to this subject... by asset allocation I meant what %,after charges, is invested in equities.. the rest being left as cash.


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## ClubMan (18 May 2005)

For what it's worth some or all of the following charges can apply to pensions these days:


Bid-offer spread or other per contribution charge of between 0% and 5% (e.g. a 5% bid offer spread means that 95% of each contribution is actually invested)
A monthly policy fee of up to c. €5 which is charged on regular contribution plans even when contributions are no longer being made
An allocation rate which may vary between say 95% and 105%. This can either exacerbate the per contribution charges or else cancel out some or all of these charges.
An annual management fee of c. 0.65% - 2% charged on the gross value of the fund and reflected in the daily unit price
There may be others but these are the main ones that may apply. You should check if any of these apply in addition to the annual management charge that you mentioned earlier. I would be surprised if there were no charges other than the annual management fee to be honest.

The asset allocation (e.g. 94% equities, 6% cash/bonds/other assets) is a separate issue from charges but is relevant to potential future performance. If you are looking for a high risk/reward aggressive fund then you should look for one with 100% equity allocation.

If in doubt get independent, professional advice.

Hope this helps.


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## RainyDay (18 May 2005)

darraghdog said:
			
		

> Apologies.. I'm relatively new to this subject... by asset allocation I meant what %,after charges, is invested in equities.. the rest being left as cash.


Are you sure about this? I think Deadly Duck was referring to 'allocation units' - which was really just another fee/charge disguised as a percentage of your contribution which does NOT go into the fund. If the 'allocation units' is 98%, then they are whipping out 2% of your contributions as a fee.


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## deadlyduck (19 May 2005)

darraghdog said:
			
		

> By the way deadly duck, did you get that deal thro an employer or on the market, and if it's on the market could you give me the details ?



Yes- it's a deal offered exclusively to staff where I work by Eagle Star.


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## deadlyduck (19 May 2005)

RainyDay said:
			
		

> Are you sure about this? I think Deadly Duck was referring to 'allocation units' - which was really just another fee/charge disguised as a percentage of your contribution which does NOT go into the fund. If the 'allocation units' is 98%, then they are whipping out 2% of your contributions as a fee.



 Yes- that's exactly what i'm refering to.


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## eoflaherty (19 May 2005)

One of the cheapest rates are those offered by Quinn  Life (). They have no initial fee so 100% is invested and  there is no bid-offer spread.They are index funds so their performance is based on tracking an index.Yearly fees are 1-1.2% depending on the fund but that drops after 16 years to 0.5-0.7%.If you live in UK it is hard to beat Alliance Trust Pensions  ([broken link removed]) which you manage yourself.


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## darraghdog (20 May 2005)

eoflaherty said:
			
		

> One of the cheapest rates are those offered by Quinn Life (). They have no initial fee so 100% is invested and there is no bid-offer spread.They are index funds so their performance is based on tracking an index.Yearly fees are 1-1.2% depending on the fund but that drops after 16 years to 0.5-0.7%.


 
Sounds interesting, are Quinn-life on this tax-deductable list of pension funds from the govt. ? In other words if you make an AVC with Quinn-life is it tax deductable ?


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## ClubMan (20 May 2005)

darraghdog said:
			
		

> are Quinn-life on this tax-deductable list of pension funds from the govt. ?



What tax deductible list? _QL _pensions definitely qualify for tax relief like any other pension. I don't think that the fact that this would be an _AVC _pension has any bearing on this.


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## eliza (24 May 2005)

ClubMan said:
			
		

> What tax deductible list? _QL _pensions definitely qualify for tax relief like any other pension. I don't think that the fact that this would be an _AVC _pension has any bearing on this.



Are you sure? I was left under the impression by my pension advisor that the fact that I was investing in an _AVC _pension meant that I had to go either with the company-provided AVC or with a special PRSA AVC in order to be able to claim tax relief?


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## ClubMan (25 May 2005)

Sorry - no, I am not sure. You/your advisor may well be correct that if your employer sponsored scheme offers an _AVC _option then if you opt for a _PRSA _for _AVCs _instead then you do not get tax/_PRSI _relief. However this has no bearing on the fact that in general _QL _pensions qualify for tax/_PRSI _relief. Maybe somebody else can clarify the position with regard to tax relief on _AVCs _via a _PRSA _when the employer sponsored scheme offers and _AVC _option?


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## Moneybags (25 May 2005)

Instead of making AVCs to employer's scheme, it is possible to set up a standalone AVC PRSA instead - see . 

AFAIK, Eagle Star, Canada Life and New Ireland offer AVC PRSAs. You have the same contribution limits as with AVCs to an employer's scheme. You get an extra tax credit to get tax relief through the PAYE system. You can reclaim 4% PRSI - but not the 2% health levy - at the end of the year.


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## ClubMan (26 May 2005)

Moneybags said:
			
		

> You can reclaim 4% PRSI - but not the 2% health levy - at the end of the year.



Are you sure about that? I was asking this very question here and seem to have been granted _PRSI _relief only on "standalone" _PRSA/RAC _contributions that I have made whereas [broken link removed] (undelining below is mine)  suggests that _PRSI _and health levy relief should apply. Is it the case that only those making pension contributions through payroll benefit from health levy relief and those that make "standalone" contributions are penalised by not getting this relief!?


> *Tax relief on contributions
> 
> *Tax relief is given at the customers highest rate of tax. If they are an employee relief is also given from PRSI and Health Levy. Where qualifying PRSA contributions are deducted by an employer, the net pay arrangement will apply. This means that PAYE, PRSI and Health Levy deductions will be calculated on wages or salary net of PRSA contributions.
> 
> Where the PRSA contributions are not deducted by an employer relief can be claimed directly from the tax office. Relief will be allowed through the PAYE system, as an additional tax credit.


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