# Thinking of starting a pension



## Sierra (8 May 2007)

I started a new job three months back mind you & it comes with a pension deal. Now I keep nagging & nagging at my boss to get it started, he's agreed to match up to 5% of my wages should I put that much in.

Now recently he told me he doesn't really believe in pensions since his dad took out one & when it matured it hadn't really grown plus there are fees. Now I'm concerned is a pension the best way to provide for my future even though its tax free & the government tops it up with €1 for every €3 I put in up to €7,500 giving me a nice juicy max of €2,500 for nought.

Are there any better alternatives to pensions in providing for my oul age & what is this regarding fees, I don't want to pay a load of fat cats my money for doing qwat all.

Wondering what you educated guys & gals might recommend.


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## setemupjoe (8 May 2007)

A friend of mine has spent roughly 350 euro a month on various shares for the last 7 years ,he never cashes in and says hes going to cash in in another 13 years ! he maintains its worth alot all ready (no figures ) he saw his dad loose all his pension  in england a few years back because of fraud/bad managment and thinks he will do better in the long run ! plus theres the wow factor if certin shares do very well . not for everybody i think but its your cash .


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## Happy Girl (9 May 2007)

Sierra said:


> IAre there any better alternatives to pensions in providing for my oul age & what is this regarding fees, I don't want to pay a load of fat cats my money for doing qwat all.


 
Would love to see a good detailed discussion on this. I still haven't taken the plunge and started a PRSA yet. So many doubts still in my mind. I accept the incentive of the tax "deferral" is good but surely 400 pm into say a Quinn Freeway Account for the next 25yrs until retirement and I can then cash it in and use it as I please instead of some company drip feeding it to me as regulations permit. Come on folks. Would love to hear comments, suggestions, etc.


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## Protocol (10 May 2007)

If your employer is willing to match your contribution, then you should be able to set up a low-cost PRSA.

I'd say you should be able to get one with 0% entry fees (i.e. 100% allocation rate), and just 1% annual management fee, by paying a discount broker to set it up.

Try:

www.labrokers.ie
www.ferga.com
[broken link removed]
[broken link removed]
www.myadviser.ie


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## KalEl (10 May 2007)

Maybe Liam could clarify this, but on his website the execution only PRSA seems to cost 3.5% per contribution plus the 1% management fee?


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## jrewing (10 May 2007)

Happy Girl said:


> I accept the incentive of the tax "deferral" is good but surely 400 pm into say a Quinn Freeway Account for the next 25yrs until retirement and I can then cash it in and use it as I please instead of some company drip feeding it to me as regulations permit.


 
If you are paying tax at the top rate, you are losing approx 41% straight away because that 400 pm is after-tax. It will cost you the same amount (Eur 400 net) to invest *Eur 677* into a pension scheme, as it is a tax-free investment. The Quinn Freeway Account is also subject to 23% tax when cashed in, as opposed to the tax-free pension money.

Most pensions schemes allow a person to withdraw a tax-free lump sum upon retirement, so it is not all about "drip-feeding".

To my mind, the financial benefits of availing of a pension scheme are unquestionable. There are many products out there, so you can choose the system that suits you best. In the long run, this is the most efficient way to provide for your future and that of your family.


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## yop (10 May 2007)

I am of the same thinking Happy Girl, would the benefit of tax relieft probably out weigh any possible growth with for example the quinn fund!!


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## yop (10 May 2007)

jrewing said:


> If you are paying tax at the top rate, you are losing approx 41% straight away because that 400 pm is after-tax. It will cost you the same amount (Eur 400 net) to invest *Eur 677* into a pension scheme, as it is a tax-free investment. The Quinn Freeway Account is also subject to 23% tax when cashed in, as opposed to the tax-free pension money.
> 
> Most pensions schemes allow a person to withdraw a tax-free lump sum upon retirement, so it is not all about "drip-feeding".
> 
> To my mind, the financial benefits of availing of a pension scheme are unquestionable. There are many products out there, so you can choose the system that suits you best. In the long run, this is the most efficient way to provide for your future and that of your family.




So sorry for the blonde question, but is there a kind of "equity" based pension?
I can see for sure now that a pension with its tax encentive is a great route, but is there ways of maximising this, like getting that pension in either high or low risk funds??

thanks


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## muesli (10 May 2007)

Don't want to sound morbid but an advantage of a (occupational) pension over just investing in the stock market yourself is the life insurance element to a pension - ie the lump sum payable if you should die...I personally don't have a PRSA so I'm not sure how generous this would be for PRSAs - maybe someone could fill me in on this ?


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## jrewing (10 May 2007)

yop said:


> So sorry for the blonde question, but is there a kind of "equity" based pension?
> thanks


 
Hi Yop,
As far as I know, Defined Contribution pension schemes and most PRSA's are equity-based. Many allow you to choose your level of risk which will determine what type of equities your money is invested in.
JR


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## KalEl (10 May 2007)

Guys, do a search on these topics and you'll learn a lot.
Most pensions are invested in equities...you can choose the funds your pension is invested in.
The benefits are clear...€100 lashed into a pension costs you roughly half that because of the tax relief and you can draw down 25% of the value of your fund tax free when you retire.
They're good


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## nestegg (10 May 2007)

KalEl said:


> €100 lashed into a pension costs you roughly half that because of the tax relief and you can draw down 25% of the value of your fund tax free when you retire


 
How does tax relief on pensions benefit those individuals who pay 20% tax on income or are tax-exempt?


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## yop (10 May 2007)

Ah right, any "good" pension funds over others, sorry been lazy!!!


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## jrewing (10 May 2007)

Yop, have a search in the Pensions forum - hundreds of threads there to keep you busy for the afternoon.


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## KalEl (10 May 2007)

nestegg said:


> How does tax relief on pensions benefit those individuals who pay 20% tax on income or are tax-exempt?


 
They still get relief the lower rate, giving them the benefit of the tax and PRSI going into the pension fund.
If they don't pay tax that's what the state pension is there for.


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## nestegg (10 May 2007)

Hi KalEl,

Just wanted to clarify that by tax-exempt I didn't mean unwaged but, for example:
*- head of one parent family *
*- working in private sector *
*- low income bracket *
*- not in receipt of SW supplement*
*- wishing to arrange supplementary pension provision*
What, in your opinion, would be the best advice for this individual other than paying into an occupational pension fund (which would appear to be of greatest benefit to those in a higher income bracket)?


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## KalEl (10 May 2007)

nestegg said:


> Hi KalEl,
> 
> Just wanted to clarify that by tax-exempt I didn't mean unwaged but, for example:
> *- head of one parent family *
> ...


 
Is there a scheme being offered to this individual?


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## nestegg (10 May 2007)

Hi KalEl,

Let's assume the following:
- er offers PRSA option in addition to Defined Contribution product
- ee earns a gross salary of €25k pa 
- ee is practically tax-free due to SPF and private rent tax relief
- ee is aged 35
- ee has one child
- ee no previous pension contributions


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## KalEl (10 May 2007)

I'd have to bow to the professional pensions experts here on this one...if you strip away the tax relief element it's hard to see the advantages


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## Lobby (21 May 2007)

So, in summary am I right in saying that the main points that differ from setting up a PRSA and investing directly in shares yourself are:

Money invested in PRSA is from Gross salary, i.e. tax-free

However, the money is tied up until 65 years of age.

And obviously the PRSA is a managed fund.


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## ClubMan (21 May 2007)

Lobby said:


> So, in summary am I right in saying that the main points that differ from setting up a PRSA and investing directly in shares yourself are:
> 
> Money invested in PRSA is from Gross salary, i.e. tax-free


Tax *and* _PRSI_/health levy free (e.g. up to 47% relief for a high rate taxpayer).
Growth on the fund is tax free - on a non pension unit linked fund it would be subject to 23% exit tax and on shares it would be subject tot 20% _CGT_.
Ability to take 25% of your pension savings as a tax free lump sum at retirement.
Pension income would be assessable for income tax whereas capital gains from other investments would not (once _CGT _is paid).


> And obviously the PRSA is a managed fund.


 Not necessarily. It could be invested in property or an index tracking fund etc.


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