# Priorities for Late 30s Onwards



## wherefore (8 Feb 2022)

*Personal details*

Age: 35
Spouse’s/Partner's age: 32

*Number and age of children:* 
One child, 8 months old

*Income and expenditure
Annual gross income from employment or profession:*
Previously 56k basic, ~16k shares and bonuses
Now 85k basic, ~20k shares and bonuses

*Annual gross income of spouse: *28k

*Monthly take-home pay:* ~6k on average going forward (my 4k after pension contributions plus partners 2k)
some of this is made up of company shares vesting at regular intervals that I sell as they become available and stock purchase plan that I contribute 10% of net pay to
and twice a year the company sells me shares at a discount (again, sell immediately)

*Type of employment*: both private

*In general are you:*
 saving

* Summary of Assets and Liabilities*
Defined Contribution pension fund: €120k
Cash of €115k
Company shares : €45k (25k RSUs of which 8.5k to vest this year, 20k APSS scheme 6.5k to vest this year)


*Family home mortgage information*
No mortgage currently as we sold our home last year and relocated. The plan is to buy a place for ~€350k this year which will do us for many years to come.

*Other borrowings – car loans/personal loans etc*
None

*Do you pay off your full credit card balance each month?*
Pay off in full

*Buy to let properties*
None

*Other savings and investments:*
None

*Do you have a pension scheme?*
~120k in DC scheme. Work put in 8% so long as I put in 4%. I put in 16% AVCs to take me up to the max.

Partner has a small PRSA with a couple of grand in it that she's not contributing to currently as she's only back to work after having a baby but will probably start again. No company help from her side.

*Other information which might be relevant

Life insurance:*
3 x final salary lump sum
Spouse's Pension 20% of final salary
Child's Pension    6.67% of final salary per child up to three children
Additional Next years bonus (10k) + 4 weeks salary

Also have income protection 66% of salary less state disability.


*What specific question do you have or what issues are of concern to you?*
TBH, I thought we were doing well but when I see it all typed out I don't know either way! My partner lost her job at the start of covid and just started back again so
between that, selling the house, relocating and having the baby it's been quite a spendy year or two. We have historically been good at keeping expenses down but maybe could stand to refocus on this a bit as life gets back to normal.

Having just had a baby recently and gotten a significant uplift in my work package I want to do a bit of an assessment and see what should be the focus/targets for the next few years. I'm maxing pension contributions and am happy to keep doing so unless there's a reason not to.

My partner and I aren't yet married and I'm conscious of the fact that if we were I would be able to avail of some of her tax credits although I doubt the amount of money involved there is substantial.

I guess we will look at having a second child some time in the next two years and would likely have three in the long term.

We will be buying a house around the middle of the year. We have an arrangement in place to buy a suitable family home for 350k. In an ideal world we would try to get a mortgage of less than 60% to get the best rate but it might be a stretch. Is the biggest priority to get the mortgage down somewhere south of 60% (or lower) in the short term?

Obviously the kids' college will cost money down the line but it always feels to me like it makes more sense to smash the mortgage than have cash idling aside for that?

I would also be interested in opinions on whether it's worthwhile my partner investing some of her much smaller salary into her PRSA at the moment?

Ideally I would love to have the option to retire in my 50s if it was plausible.


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## Steven Barrett (9 Feb 2022)

First of all, get married. You are strangers in the eyes of the law and there's all sorts of tax complications involved. 

This next piece of advice is recency bias, but get life cover for both of you and lots of it. Had a phone call from a retired clients yesterday who told me that his daughter in law dropped dead the previous week. She was 40 years of age and it was suddenly. Two young kids. Life cover isn't expensive. 

Now you have a kid and plan to have more, there are huge demands on your money. A lot of posters here like to take an A or B approach. I opt for the A and B option. 

First priority is your house. Save as much as you can for that. It is going to be a massive cost. Don't worry if you get a mortgage over 60%. Once you have an LTV < 60%, you can get the lower rate applied to your mortgage. You just need a valuation and they aren't expensive. 

Your pension should always be ticking away in the background. You don't necessarily have to be maxing out each year but you did get a big pay rise, so you should be able to afford to make bigger contributions, especially after the saving for the house purchase is out of the way. Remember for your mortgage, you must show the bank you can afford the repayments through current saving levels. 

Then there is future education costs. The earlier you start saving for this, the less it will cost you per month. You will also need to build up a cash fund that you can use for cashflow purposes if there is a big purchase. 

Have good saving habits, live below your means and put those savings into capital markets and you'll be fine. 

If you want to have the option of retiring in your 50's, you'll have to cut back on things and make sure you save that money instead. It's a big ask and not many people can afford to retire at that age (there is a 10 year span, which is a lot to work with). 


Steven
www.bluewaterfp.ie


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## ClubMan (9 Feb 2022)

wherefore said:


> Cash of €115k
> 
> No mortgage currently as we sold our home last year and relocated.


Just curious, is the €115k the net proceeds of the sale or did you omit that?


			
				wherefore said:
			
		

> some of this is made up of company shares vesting at regular intervals that I sell as they become available and stock purchase plan that I contribute 10% of net pay to
> and twice a year the company sells me shares at a discount (again, sell immediately)


I presume that the income tax liabilities on these are being taken care of? Just so you're not storing up any tax issues to come back to haunt you later...


Steven Barrett said:


> If you want to have the option of retiring in your 50's, you'll have to cut back on things and make sure you save that money instead. It's a big ask and not many people can afford to retire at that age (there is a 10 year span, which is a lot to work with).


15?
Edit: oh, you mean 10 years between early retirement at age 50 and the more common retirement age of 60+?


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## wherefore (9 Feb 2022)

Thanks Steven, plenty to ponder there.

@ClubMan the €115k includes the net proceeds of the house. 

Most of the tax implications of the different share schemes are taken care of at the time. With some of them there can be tax due on gains that isn't looked after automatically but I have access to an accountant to help me with filing a return every year so I think I should be all sqaure.


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## Steven Barrett (9 Feb 2022)

ClubMan said:


> 15?
> Edit: oh, you mean 10 years between early retirement at age 50 and the more common retirement age of 60+?


No, I meant the OP said he would like to have the option of retiring in his 50s. There's a big difference between age 50 and 59. 9 years more salary, more growth, more savings. If you worked out the numbers required for either age, they wouldn't be even close.


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## ClubMan (9 Feb 2022)

wherefore said:


> With some of them there can be tax due on gains that isn't looked after automatically but I have access to an accountant to help me with filing a return every year so I think I should be all sqaure.


Is that CGT in the case where you hold onto them after exercise/vest and sell later at a gain (or loss)? You seem to be selling immediately on vesting in all cases so CGT shouldn't be an issue? I totally agree with your approach because people who hold onto incentive stock in the company that they work for are putting at least two eggs (their salary and the stock) in one basket which is concentrating the risk.

BTW you seem to be doing ok to me just in case you were still a bit doubtful.


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## wherefore (9 Feb 2022)

Steven Barrett said:


> First of all, get married. You are strangers in the eyes of the law and there's all sorts of tax complications involved.



Noted 



Steven Barrett said:


> This next piece of advice is recency bias, but get life cover for both of you and lots of it. Had a phone call from a retired clients yesterday who told me that his daughter in law dropped dead the previous week. She was 40 years of age and it was suddenly. Two young kids. Life cover isn't expensive.



Could you recommend some reading I might do on the level of life cover that's worth having? Assuming nobody dies before we are in the new house then mortgage protection would mean the house would be paid off and as it stands my partner (assume wife for simplicity for the moment) would get something like 430k (3x salary + 120k pension pot + shares/bonuses ~60k) plus 17k PA + 5.5k (per child) PA if I'm reading my work policy right. I thought that sounded like a lot but now you've held a lens up to it how long would that last in a really unforeseen circumstance? 

But I have no idea what sort of number would be suitable to aim for here - any advice? I see from chill.ie at a quick glance 500k insurance with a 30 year term would be €340 PA.



Steven Barrett said:


> First priority is your house. Save as much as you can for that. It is going to be a massive cost. Don't worry if you get a mortgage over 60%. Once you have an LTV < 60%, you can get the lower rate applied to your mortgage. You just need a valuation and they aren't expensive.



Good to know re:getting the change of rate applied, thanks. 



Steven Barrett said:


> Your pension should always be ticking away in the background. You don't necessarily have to be maxing out each year but you did get a big pay rise, so you should be able to afford to make bigger contributions, especially after the saving for the house purchase is out of the way. Remember for your mortgage, you must show the bank you can afford the repayments through current saving levels.
> 
> Then there is future education costs. The earlier you start saving for this, the less it will cost you per month. You will also need to build up a cash fund that you can use for cashflow purposes if there is a big purchase.
> 
> Have good saving habits, live below your means and put those savings into capital markets and you'll be fine.



Is there a particular vehicle that you would recommend for saving towards future education costs? I had invested in index funds in the past and am comfortable enough with the idea although at the time it was all US domiciled ETFs so the tax treatment was easier to take care of.



Steven Barrett said:


> If you want to have the option of retiring in your 50's, you'll have to cut back on things and make sure you save that money instead. It's a big ask and not many people can afford to retire at that age (there is a 10 year span, which is a lot to work with).



Let me just describe my naive thinking on this, so that in the likely event I'm totally working it out wrong someone can point it out for me.

I'm using an investment calculator to say that with 5% return rate (I believe inflation adjusted SNP500 50 year return is 5.4%), my 120k pension pot now if I max my contribution for the next 5 years would get to €289k, which would become €825k by 50 including increasing contributions to 25%. If I were to leave that pot to grow without contributions from there in ten years I would be 60 and it would be up to €1.7M. Now first I need to check that I'm right in thinking using an inflation adjusted growth rate means my purchasing power with those future amounts doesn't go down too much? If that's the case by my reckoning the gap to financial independence is what I do for money in that ten year span between 50 & 60. So I would need to be mortgage free (overpayment somewhere in the region of €700pm) and either create some passive income, a good sized cash reserve, work part time or some combination of the three. 

As you say there's a big difference between jacking it in at 50 vs 55 vs 59 in that. Is my rationale here correct or am I making some basic error about how the pension will accumulate w.r.t inflation or anything else? If we leave out how feasible it is to overpay the mortgage, max pension contributions, pay college fees, build passive income/nestegg and live a fulfilling life for the next 20 years, would I at least land where I think I would if I did all that right? At least if I know the above is possible or not I can factor it into my thinking as the years go and big decisions crop up.


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## wherefore (9 Feb 2022)

ClubMan said:


> Is that CGT in the case where you hold onto them after exercise/vest and sell later at a gain (or loss)? You seem to be selling immediately on vesting in all cases so CGT shouldn't be an issue? I totally agree with your approach because people who hold onto incentive stock in the company that they work for are putting at least two eggs (their salary and the stock) in one basket which is concentrating the risk.
> 
> BTW you seem to be doing ok to me just in case you were still a bit doubtful.



So some of the shares are bonuses that I put into APSS scheme and if I leave them there for three years I get the original amount tax free. Occasionally (unfortunately infrequent lately) the value of the shares goes up so while the original amount is tax free there can be CGT on the gain. I think I've only ever had this amount to a tiny tax bill as the amounts are low, the growth is poor and the €1270 allowance normally covers it.


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## Peanuts20 (9 Feb 2022)

Couple of thoughts, ensure you have a will and have a plan for what happens the child in the unlikely event of something untoward happening one or both of you. With a child, you should also be doing a full review of your life insurance position

Secondly, ensure you have both done tax returns and claimed back everything you can claim back.

Also review your health insurance and make sure it is the best package for a family, especially if another smallie is likely.


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## wherefore (9 Feb 2022)

Peanuts20 said:


> Couple of thoughts, ensure you have a will and have a plan for what happens the child in the unlikely event of something untoward happening one or both of you. With a child, you should also be doing a full review of your life insurance position
> 
> Secondly, ensure you have both done tax returns and claimed back everything you can claim back.
> 
> Also review your health insurance and make sure it is the best package for a family, especially if another smallie is likely.



Thanks Peanuts. I'm actually calling to my solicitor on Friday on a different topic so I will talk to him about doing a will as well - I hadn't thought of it.

My company pays for my health insurance at the moment (and my partner and child) and the plan is pretty good, which is a nice position to be in.


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## NoRegretsCoyote (9 Feb 2022)

Steven Barrett said:


> Then there is future education costs. The earlier you start saving for this, the less it will cost you per month. You will also need to build up a cash fund that you can use for cashflow purposes if there is a big purchase.


This is all excellent advice. I quibble only about the need to build up for future education costs.

You will still have an income when your kids are in college and you will be able to fund costs from that income. In the meantime a good strategy is to have mortgage paid down as much as possible by the time college comes around.


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## Firefly (9 Feb 2022)

Hi wherefore,

Open a separate account for the children's allowance. Get it paid into that & forget about it. You'll have over 25k for each of them by the time they are 16...

Firefly.


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## ClubMan (9 Feb 2022)

Firefly said:


> Hi wherefore,
> 
> Open a separate account for the children's allowance. Get it paid into that & forget about it. You'll have over 25k for each of them by the time they are 16...
> 
> Firefly.


Hopefully not a deposit account?
If you're going to do this then if at all possible buy shares with it or otherwise invest it.
(Cue off topic discussion about how disgraceful it is that well off people get child benefit).


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## wherefore (9 Feb 2022)

NoRegretsCoyote said:


> This is all excellent advice. I quibble only about the need to build up for future education costs.
> 
> You will still have an income when your kids are in college and you will be able to fund costs from that income. In the meantime a good strategy is to have mortgage paid down as much as possible by the time college comes around.



This highlights another point - I actually don't really have any idea what education costs are likely to be. What are we talking about in today's money currently does anyone have a ball park notion?


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## NoRegretsCoyote (9 Feb 2022)

wherefore said:


> What are we talking about in today's money currently does anyone have a ball park notion?


Totally depends on whether your child can live at home or not.


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## ClubMan (9 Feb 2022)

And also what you're talking about.
Crèche/playschool?
Private primary?
Private secondary?
College/university?
College accommodation?
Etc.


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## wherefore (9 Feb 2022)

NoRegretsCoyote said:


> Totally depends on whether your child can live at home or not.





ClubMan said:


> And also what you're talking about.
> Crèche/playschool?
> Private primary?
> Private secondary?
> ...



Yes, true on both counts I suppose.  A 'piece of string' type question. I'll consider it a bit more on my own time.


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## Steven Barrett (9 Feb 2022)

NoRegretsCoyote said:


> This is all excellent advice. I quibble only about the need to build up for future education costs.
> 
> You will still have an income when your kids are in college and you will be able to fund costs from that income. In the meantime a good strategy is to have mortgage paid down as much as possible by the time college comes around.


And if you don't have the mortgage paid down by the time college comes around, you have mortgage repayments and college fees coming out of cashflow. 

If he put a few hundred away each month from now, capital markets will pay for some of the cost of college so he won't have a €4,500 lump sum coming out of cashflow. 

He can both pay down the mortgage and save for education at the same time. 

Steven
www.bluewaterfp.ie


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## NoRegretsCoyote (9 Feb 2022)

Steven Barrett said:


> If he put a few hundred away each month from now, capital markets will pay for some of the cost of college so he won't have a €4,500 lump sum coming out of cashflow.


I disagree. Over a 20 year horizon overpaying on the mortgage will give a better expected return than investing in an equity product with fees and taxes.

OP could get into the habit of overpaying mortage by the cost of college for a few years when kids in late teens, then stop the overpayments when kids are actually in college.


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## Firefly (9 Feb 2022)

ClubMan said:


> Hopefully not a deposit account?


Yes, but I think even worse for many people, the money just gets lodged to their current account(s) and disappears into the ether.


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## Steven Barrett (9 Feb 2022)

NoRegretsCoyote said:


> I disagree. Over a 20 year horizon overpaying on the mortgage will give a better expected return than investing in an equity product with fees and taxes.
> 
> OP could get into the habit of overpaying mortage by the cost of college for a few years when kids in late teens, then stop the overpayments when kids are actually in college.


But he won't have built up any cash as it has all gone into the mortgage. 

And while the expected return is greater, the actual return over the last 10 years has been less and you would have made more money by investing. Of course, there is no guarantee, that is the element of risk v return. 

But my main argument is that there will be a need for liquid assets that overpaying a mortgage doesn't provide until decades later. That is why I advise a bit of A and a bit of B. I don't need you to agree with it. We just have a different opinion on this.


Steven
www.bluewaterfp.ie


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## NoRegretsCoyote (9 Feb 2022)

Steven Barrett said:


> But my main argument is that there will be a need for liquid assets that overpaying a mortgage doesn't provide until decades later.


It's true that you don't have a liquid asset. Once a mortgage is paid it's paid and home equity is very difficult to access in Ireland right now but that might be different in 20-odd years.

Otherwise I agree our differences are only on emphasis, not fundamentals.


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## wherefore (10 Feb 2022)

So one thing that we've decided to do straight away is start putting the children's allowance into an index fund. @Firefly pointing out how much it amounts to even in the absence of growth was a real eye opener. It's basically invisible to me in terms of income, yet if I'm calculating right a 4% growth rate would see it worth ~€45k after 18 years. I see a Zurich estimate that the cost is €12k PA for a student living in rented accommodation so while €45k is unlikely to cover it in 18 years time but might be worth a year or two hopefully! If another little one comes along we will do the same. I'm thinking that this would be better for my partner to have in her name as she has headroom in the 20% income tax bracket and I think we're likely to end up in a fund where the gain will be taxed as income?

We're also going to take out a joint life insurance policy, although I'm still not really sure what sort of amount is advisable in general. I'll think on it some more.

We also agreed we should probably get married without further delay as well so I may have to ask @Steven Barrett to stand for me


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## ClubMan (10 Feb 2022)

If you're going to invest the child benefit in equities for a period of 10-15 years then you'd arguably be better off buying shares directly rather than buying into an investment fund due to the better tax treatment and lower costs of the former.


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## Steven Barrett (11 Feb 2022)

wherefore said:


> So one thing that we've decided to do straight away is start putting the children's allowance into an index fund. @Firefly pointing out how much it amounts to even in the absence of growth was a real eye opener. It's basically invisible to me in terms of income, yet if I'm calculating right a 4% growth rate would see it worth ~€45k after 18 years. I see a Zurich estimate that the cost is €12k PA for a student living in rented accommodation so while €45k is unlikely to cover it in 18 years time but might be worth a year or two hopefully! If another little one comes along we will do the same. I'm thinking that this would be better for my partner to have in her name as she has headroom in the 20% income tax bracket and I think we're likely to end up in a fund where the gain will be taxed as income?
> 
> We're also going to take out a joint life insurance policy, although I'm still not really sure what sort of amount is advisable in general. I'll think on it some more.
> 
> We also agreed we should probably get married without further delay as well so I may have to ask @Steven Barrett to stand for me


You aren't the first to get married based on my financial advice. And who said romance was dead 

Index funds aren't taxed as income or under CGT, they are taxed under exit tax at 41%. If you use a company like Zurich, they will look after the tax for you and pay it to the revenue from the fund when it is due. 

On life cover, just get as much as you can for your budget. If you have another kid, you will need more then than you need now. It's easier and cheaper to get one plan now rather than a smaller one now and a top up later. 


Steven
www.bluewaterfp.ie


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## misemoi (11 Feb 2022)

On the marriage front, it's worth considering doing a quick & easy civil ceremony to be legally married, then plan whatever celebration you have down the line. You will get the benefits of the marriage immediately but if a big day out is what you want you can plan that at your leisure!


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## wherefore (11 Feb 2022)

ClubMan said:


> If you're going to invest the child benefit in equities for a period of 10-15 years then you'd arguably be better off buying shares directly rather than buying into an investment fund due to the better tax treatment and lower costs of the former.





Steven Barrett said:


> You aren't the first to get married based on my financial advice. And who said romance was dead
> 
> Index funds aren't taxed as income or under CGT, they are taxed under exit tax at 41%. If you use a company like Zurich, they will look after the tax for you and pay it to the revenue from the fund when it is due.



Bah, it's been a few years since I had any personal investments so I misremembered how the different taxation schemes are applied. Thanks for the tip re:Zurich - I see now from googling that a lot of companies have investment products targeted at this sort of education saving for modest investments. I'll do some research but at least I think we have a direction of travel on this front - invest ~€200p/m specifically for the small fella's college in some appropriate vehicle the bulk of which comes from Child Allowance and won't hinder mortgage overpayment much. We will need to keep an eye on the investment and adjust if it looks like not being enough.



Steven Barrett said:


> On life cover, just get as much as you can for your budget. If you have another kid, you will need more then than you need now. It's easier and cheaper to get one plan now rather than a smaller one now and a top up later.



Got it, thanks.



misemoi said:


> On the marriage front, it's worth considering doing a quick & easy civil ceremony to be legally married, then plan whatever celebration you have down the line. You will get the benefits of the marriage immediately but if a big day out is what you want you can plan that at your leisure!



I think this is what we're going to do. I don't think either of us have much appetite for spending a big wedge on a hoolie to be honest. Other peoples' weddings are better craic anyway


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## ClubMan (11 Feb 2022)

wherefore said:


> Bah, it's been a few years since I had any personal investments so I misremembered how the different taxation schemes are applied. Thanks for the tip re:Zurich - I see now from googling that a lot of companies have investment products targeted at this sort of education saving for modest investments.


They're almost certainly all unit linked style funds subject to taxation and charges that is worse than shares.


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## Steven Barrett (11 Feb 2022)

ClubMan said:


> They're almost certainly all unit linked style funds subject to taxation and charges that is worse than shares.


True. But there's no work involved. Complete the form at the beginning and sign the direct debit. You get investment in the MSCI World Index or the like, the life company takes care of all the tax and admin for you. 

If you are paying €200 and buying shares, you have to do all the buying, admin and taxation yourself. I'd be happy to outsource (and have done so in the past) for a relatively small monthly amout.


Steven
www.bluewaterfp.ie


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## ClubMan (11 Feb 2022)

Fair enough, but one will pay *significantly* in terms of reduction in yield for the convenience. I have some unit linked funds over many years myself but regret not having just invested the money directly in shares.


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## NoRegretsCoyote (11 Feb 2022)

ClubMan said:


> I have some unit linked funds over many years myself but regret not having just invested the money directly in shares.


Out of curiosity, how much do you diversify?

I have no experience but I would have thought that having direct holdings of 50-odd shares and periodically re-balancing is a lot of work.


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## wherefore (11 Feb 2022)

NoRegretsCoyote said:


> Out of curiosity, how much do you diversify?
> 
> I have no experience but I would have thought that having direct holdings of 50-odd shares and periodically re-balancing is a lot of work.



That would be my concern as well - how do I pick the shares and how complicated is tracking gains/losses for tax purposes on different shares bought month by month in small amounts?


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## ClubMan (11 Feb 2022)

NoRegretsCoyote said:


> Out of curiosity, how much do you diversify?


I don't know what you mean.
I have some money in equity heavy unit linked funds.
Obviously I don't manage the composition of these.
I've been meaning to review these and maybe cash them in and invest directly in shares.


NoRegretsCoyote said:


> I have no experience but I would have thought that having direct holdings of 50-odd shares and periodically re-balancing is a lot of work.


My main direct shareholdings are in Berkshire Hathaway and Markel. I let them do the diversification because I'm lazy. I am aware of the risks involved (currency, concentration in certain markets/geographic regions etc.).

If (most) ETFs weren't taxed so penally I would invest in them. Maybe some day that will change?


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## NoRegretsCoyote (11 Feb 2022)

ClubMan said:


> I don't know what you mean.


Sorry I meant for your non-ETF portfolio.

I agree buying Berkshire is diversification in and of itself.


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## ClubMan (11 Feb 2022)

NoRegretsCoyote said:


> Sorry I meant for your non-ETF portfolio.


I don't have any ETFs.
Their tax treatment (in most cases) is as bad as unit linked style funds unfortunately.


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## wherefore (15 Feb 2022)

I've been ruminating on the positives and negatives of the funds vs direct share investing for the kids' college fund for a while. 

I came across Irish Life's saving scheme (https://www.irishlife.ie/investments/long-term-savings/) which looks potentially ok.  Looking at the ‘Consensus Equity Fund’ for instance. There’s a 1% entry fee which is a government levy, after that it’s 1.65% a year. Not great but not atrocious. I plugged numbers into a calculator just to get an idea and the impact is actually not terrible (if I've calculated it properly). There's a value to not having to worry about calculating the deemed disposal amounts - just signing the direct debit mandate and letting it run as @Steven Barrett mentioned. 

I'm still toying with the idea of a pseudo-diversified portfolio of direct shareholdings like Berkshire, J&J etc as @ClubMan described (really neat idea, hadn't thought of it) but I think I might do that in addition over the course of the next couple of years rather than instead of the fund.







We've applied for a joint life insurance top-up of €400k with a term of 25 years that will cost ~€500PA also


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## ClubMan (15 Feb 2022)

wherefore said:


> There’s a 1% entry fee which is a government levy, after that it’s 1.65% a year. Not great but not atrocious.


I disagree. That *is* an atrocious annual management charge in my opinion.

Are you sure about the 1% entry fee being a government levy? Do all unit linked style funds have to levy that? I wasn't aware of it but it's many years since I invested via such a fund. Can't find anything authoritative online. I just see it mentioned on the Irish Life site but not elsewhere so far...


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## ClubMan (15 Feb 2022)

Inadvertent duplicate post deleted.


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## Steven Barrett (15 Feb 2022)

ClubMan said:


> I disagree. That *is* an atrocious annual management charge in my opinion.
> 
> Are you sure about the 1% entry fee being a government levy? Do all unit linked style funds have to levy that? I wasn't aware of it but it's many years since I invested via such a fund.


1.65% is expensive. 

The 1% charge is the government levy on life assurance investment funds and protection policies. Still in place and no sign of being taken away. Afterall, only rich people save.


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## ClubMan (15 Feb 2022)

Thanks @Steven Barrett - I wasn't aware of that 1% and many of the sites dealing with unit linked funds seem a bit coy about the charges that apply for some reason!  

Are there any unit linked funds not structured as life assurance funds and exempt from the levy?


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## wherefore (15 Feb 2022)

Hmm. I must be looking in the wrong places in that case. The Zurich options I can see are even more expensive, for instance the Indexed Global Equity (BlackRock) fund available in the Savings Plus scheme has an entry fee of 1.54% & ongoing costs of 1.95%.

Is the entry fee a one-off setup fee, or do they subtract 1.54% from every deposit made? 







The Aviva funds have management fees of over 3% for indexed equity funds:


			https://www.avivabroker.ie/wp-content/uploads/active/Active/FUND_JSRI251_B58.pdf


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## Ndiddy (15 Feb 2022)

Steven Barrett said:


> 1.65% is expensive.
> 
> The 1% charge is the government levy on life assurance investment funds and protection policies. Still in place and no sign of being taken away. Afterall, only rich people save.


Is this on funds in pension wrappers too?  Or just when you invest outside of retirement funds?


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## Steven Barrett (15 Feb 2022)

ClubMan said:


> Thanks @Steven Barrett - I wasn't aware of that 1% and many of the sites dealing with unit linked funds seem a bit coy about the charges that apply for some reason!
> 
> Are there any unit linked funds not structured as life assurance funds and exempt from the levy?


I am not aware of unit linked funds outside of life assurance companies.


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## Steven Barrett (15 Feb 2022)

wherefore said:


> Hmm. I must be looking in the wrong places in that case. The Zurich options I can see are even more expensive, for instance the Indexed Global Equity (BlackRock) fund available in the Savings Plus scheme has an entry fee of 1.54% & ongoing costs of 1.95%.
> 
> Is the entry fee a one-off setup fee, or do they subtract 1.54% from every deposit made?
> 
> ...


Those are the maximum possible charges that can be levied on the contract. The life company will have a number of different charging structures and those charges won't apply. It's what makes the whole thing worthless.


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## Steven Barrett (15 Feb 2022)

Ndiddy said:


> Is this on funds in pension wrappers too?  Or just when you invest outside of retirement funds?


The 1% levy does not apply to pensions. Just insured investment products  and risk benefits.


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## Ndiddy (15 Feb 2022)

Steven Barrett said:


> The 1% levy does not apply to pensions. Just insured investment products  and risk benefits.


Thanks. So if you are not too far from age 50 when you might possibly access Defined Contribution pension plans or the accessibility aligns with when you might need to withdraw ( i.e. college fees, upgrade of home, etc.), shouldn't people just put their extra funds within their pension wrapper rather than invest outside of it and have to deal with complex tax issues?  Even if it is more than the percentage that is tax-relieved by age?


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## NoRegretsCoyote (15 Feb 2022)

Ndiddy said:


> So if you are not too far from age 50 when you might possibly access Defined Contribution pension plans or the accessibility aligns with when you might need to withdraw ( i.e. college fees, upgrade of home, etc.), shouldn't people just put their extra funds within their pension wrapper rather than invest outside of it and have to deal with complex tax issues?


This would seem to be simplest and tax efficient for the OP. His kids' college expenses won't start until he's 52 and will peak in his late 50s.

Is there another reason to keep the funds outside a pension wrapper that I'm missing?


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## wherefore (15 Feb 2022)

Steven Barrett said:


> Those are the maximum possible charges that can be levied on the contract. The life company will have a number of different charging structures and those charges won't apply. It's what makes the whole thing worthless.


Hi Stephen, sorry for being a bit slow on the uptake. Is there some way for me to see what charging structure would apply in my case outside of ringing the company up directly? I don't quite follow your last sentence...


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## Steven Barrett (16 Feb 2022)

Ndiddy said:


> Thanks. So if you are not too far from age 50 when you might possibly access Defined Contribution pension plans or the accessibility aligns with when you might need to withdraw ( i.e. college fees, upgrade of home, etc.), shouldn't people just put their extra funds within their pension wrapper rather than invest outside of it and have to deal with complex tax issues?  Even if it is more than the percentage that is tax-relieved by age?





NoRegretsCoyote said:


> This would seem to be simplest and tax efficient for the OP. His kids' college expenses won't start until he's 52 and will peak in his late 50s.
> 
> Is there another reason to keep the funds outside a pension wrapper that I'm missing?



It's not that straight forward. For one, in a pension you get 25% tax free and the remainder is taxed under the PAYE system. If you have a big pension, you could be paying up to 52% in tax. An investment is taxed at 41% on the gains. 

Second, and most importantly is access to the pension at age 50. Most people who avail of this are taking the money from retained pension benefits. As these are from old employment, you cannot add to these plans. If you want to access the funds on a pension scheme that you are currently contributing to, you have to leave that scheme. That could be 15 years worth of contributions you are missing out on. 

Don't let the tail wag the dog. Yes, we want to do things as efficiently as possible but don't lose sight of what you want the money for. Sometimes things may be done in a less efficient way but you achieve you goals with less hassle. Sometimes simplicity trumps tax efficiency.  


Steven
www.bluewaterfp.ie


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## Steven Barrett (16 Feb 2022)

wherefore said:


> Hi Stephen, sorry for being a bit slow on the uptake. Is there some way for me to see what charging structure would apply in my case outside of ringing the company up directly? I don't quite follow your last sentence...


You need to ask the person selling you the product what the charging structure is. Zurich Life have a wide range of different structures and it is the advisor selling you the product that chooses the structure to suit the way they want to be paid. 

Zurich Life have say 20 different combinations of charging structures. But their disclosure document only shows one, the most expensive. The quote they show will only apply to one type of contract. And in my experience, most people aren't given the most expensive contract anyway. 

Steven
www.bluewaterfp.ie


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## ClubMan (16 Feb 2022)

Steven Barrett said:


> You need to ask the person selling you the product what the charging structure is. Zurich Life have a wide range of different structures and it is the advisor selling you the product that chooses the structure to suit the way they want to be paid.
> 
> Zurich Life have say 20 different combinations of charging structures. But their disclosure document only shows one, the most expensive. The quote they show will only apply to one type of contract. And in my experience, most people aren't given the most expensive contract anyway.
> 
> ...


So much for transparency?


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## Steven Barrett (16 Feb 2022)

ClubMan said:


> So much for transparency?


Regulators spend so much time making sure that everything is disclose, they swamp the consumer with paperwork and forms that only a few people will actually ready. What they really need to do is simplify disclosure down to 1 page. The rest is just ticking boxes that is a cost to the consumer because the advisor/ producer has to spend time in producing these documents, which the consumer will never read. 


Steven
www.bluewaterfp.ie


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## ClubMan (16 Feb 2022)

Steven Barrett said:


> Regulators spend so much time making sure that everything is disclose, they swamp the consumer with paperwork and forms that only a few people will actually ready. What they really need to do is simplify disclosure down to 1 page. The rest is just ticking boxes that is a cost to the consumer because the advisor/ producer has to spend time in producing these documents, which the consumer will never read.
> 
> 
> Steven
> www.bluewaterfp.ie


I thought that that was the idea behind stuff like KIID/PRIIPs etc.?








						Key information documents for packaged retail and insurance-based investment products (PRIIPs)
					

EU rules governing the information provided to investors in financial products.




					ec.europa.eu


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## wherefore (16 Feb 2022)

Much obliged for the further explanation @Steven Barrett


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## Steven Barrett (16 Feb 2022)

ClubMan said:


> I thought that that was the idea behind stuff like KIID/PRIIPs etc.?
> 
> 
> 
> ...


Rubbish. Too much generic information. 

ESMA ratings are rubbish too. They give funds ratings based on volatility in the previous 3 years. With 3 years of low volatility, a Managed fund will have a lower risk rating than in a time when there is high volatility. It's the same fund!! But the Esma rating will be different based on the time that you invested your money?!!


Steven
www.bluewaterfp.ie


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## ClubMan (16 Feb 2022)

I wouldn't put much faith in *any* ratings agency to be honest. Just look at their track records. E.g.:





						Credit rating agencies and the subprime crisis - Wikipedia
					






					en.wikipedia.org
				



But if a leaflet clearly stated the charges that the customer will pay (not just the highest possible) and maybe the reduction in yield then that's concrete info that can be relied upon. I can't remember if KIID etc. carries that info?


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## Steven Barrett (16 Feb 2022)

ClubMan said:


> I wouldn't put much faith in *any* ratings agency to be honest. Just look at their track records. E.g.:
> 
> 
> 
> ...


Get this all the time. I have been in the industry a long time and have deals with some providers that aren't available to every advisor. The generic quote systems that they have don't reflect these deals I can get a client. 

All of my statement of suitability documents lay out all the charges that apply to the client. But they get quote with the insurance company logo on it with higher charges, so the question what I have told them. "But it has their logo on it". It's not the clients fault, it's the industries fault for creating such an opaque system. It is slowly moving away from it but Brokers Ireland will keep on lobbying hard to keep the old way for its members (I am not a member of Brokers Ireland). 


Steven
www.bluewaterfp.ie


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