# Miselling Scandel Now Guaranteed ( Misspelling Scandal ? )



## Brendan Burgess (5 Dec 2002)

_ Title edited for clarity - Brendan _

Unless the failure to equalise tax relief on contributions  between RAC's ( Personal pensions) and PRSA's is addressed, there is a going to be a stampede to PRSA's. Meanwhile, the Pensions Board (whose PRSA head is ex Central Bank), hasn't seen fit to impose a compulsion at point of sale to put the "Standard" pricing model side by side with the higher, ( or lower) commission non-standard type. Most sales will be of the latter type, just as 90% endowments outsold 40% endowments despite better numbers and past performance during the last miselling scandel. Instead the PB believes it can bypass the sales patter with advertising and PR, getting 0.50m yesterday.

This won't work. Hasn't a snowballs chance of outshouting the combined marketing power and salesmanship of the sales forces concerned.

The result is, I believe, a miselling scandel of large proportions as personal pensions and AVC's are replaced with, mostly, non-standard PRSA's. The smokescreen will be higher relief to the 30 to 50 year olds. The Minister needs to stop listening to the Pensions Board who are in favour, it seems of a tax relief differential, and start using his instincts. This differntial will simply trigger substitute selling, and will have zero impact on the non pension market. It will be addressed in the Finance Act
if there is enough people warning about this potential scandel in the brewing.

Any takers - what do you think?


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## Copernicus (6 Dec 2002)

*PRSI/PRSA*

Hi Mith,

I think you may have a point alright.

On a separate note, won't the Budget proposals re putting PRSI on BIK strangle PRSAs at birth unless they are amended?  

As I understand it, employers' contributions to PRSAs will be classed as a BIK.   Employees will be entitled to income tax relief on those contributions - but what about PRSI relief?

I guess this will be need to be addressed in the Finance Bill.


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## US (6 Dec 2002)

*PRSAs and tax reliefs*

Appying different tax relief limits to PRSAs and RACs is an extremely stupid idea.  All it can do is to distort choice.  I have yet to meet anybody who can explain why it was done and why it was thought to be a good idea.

In reality it should make little difference to most consumers, especially the currently unpensioned at whom the PRSA is supposed to be aimed.  Very few people pay contributions at rates up to the current maximum levels, so the ability to pay even higher contributions to a PRSA is not relevant to them.

But, I agree, if consumers are looking for some basis to make a choice between PRSAs and RACs, the fact that PRSAs attract more generous tax relief, even if this is unlikely to be relevant to them, is at least a point which they will easily understand, and they will use it to make their choice.

Stupid and meaningless differences of treatment like this are the kind of thing that complicate the pensions tax regime.  They serve no public purpose, and the complexity which they create scares many people away from formal pension provision altogether.

Hopefully the contribution rates will be equalised at the first opportunity (i.e. the Finance Bill).


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## Caius Martius (7 Dec 2002)

*Re: Miselling Scandel Now Guaranteed*

They seem to be making a dogs dinner out of something that was supposed to be simple. I have no doubt that there have been more submissions to the Pensions Board for Non Standard approval than Standard. If this is the case then the Board must be asleep, as the providers interest is not in extended coverage but in premium income.

Rumour has it that a bancassurer will only be offering scheme business only but I can't see why they would turn away money from an individual. Unless of course it's over a certain minimum premium.

The providers are judged by their masters on new premium income, and this is what market share is decided upon at the end of each year. To the best of my knowledge lapses/cancellations have no bearing. So, after a miserable year this year the management will be back in the good books again next year.   

By the time reality checks in it will be too late. They will not get the coverage they are looking for. I don't know what's going to make this right but the self interest of the principal parties bandwagon will be hard to stop.

Perhaps a letter from Professional Indemnity Insurers to Advisors on the imminent pit-falls wouldn't go astray.


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## The Virus (7 Dec 2002)

*Re: Misspelling Scandal*

_Mith_, that's not how you spell scandal.:lol :evil


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## Glandalf (8 Dec 2002)

*Mith is right for the wrong reason*

Despite the word having been Mithspelt lol ), there is indeed a misselling PRSA scandal waiting to happen.

I don't think the "churning" that _Mith_ refers to will actually transpire to any great extent - even brokers are scared stiff of churnng.

The "scandal" will arise when after a while it is realised that the majority of PRSAs being sold  are of the non standard variety (I agree with _Mith_, that this is a certainty).  The PB, God love them, thought that the non standard PRSA would be used as a sort of niche version, allowing High Net Worth types to indulge in Japanese equities and the like.

Far from being "niche" the "non" standard PRSA will very much be the "standard".  Why?  For the higher commissions/charges silly.

In the UK there is an absolute cap of 1% fund management charge on Stakeholder.  The cap on Standard PRSAs has a very generous additional facility to charge 5% on contributions.  Why the PB saw fit to allow even higher charges is quite a mystery to me, and a decision which they will surely live to regret and change.:rolleyes


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## Mithrandir (8 Dec 2002)

*The PB Position*

Firstly I'm sorry for my spelling. I'd like to think it was too much speed, and not enough concentration, but I've never been top of the class at spelling I'm ashamed to admit. I do try.

The PB reckon that the €500k advertising spending will suffice to resist market forces. I also reckon that the PB lobbied for the tax differential to give PRSA's an edge. This is a folly, and when it becomes clear to the PB that it has hugely misunderstood the dynamics of the market it will then act. Then it will be too late, and don't expect it to admit being wrong.

Meanwhile I will personally get the message through to the Dept of Finance, at the right level, that it may be underwriting the next misselling scandal since endowment mortgages. If the Dept doesn't adjust the Finance Act, it will share in the blame.

I think the scale of the problem shouldn't be underestimated. Nearly everybody pumping money into,  Personal Pensions, aged 30 to 50, will become a target, with Non-Standard PRSA's. Considering that most of these innocents will have already paid up front charges to get into the market mostly at 0.75% amc's, the total cost of the "churn", could run into millions of euro in a small space of time. I really don't think that this is an exaggeration - I wish it was.


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## George Bush III (9 Dec 2002)

*PRSAs*

What a relief that Mith will "personally get the message through to the Dept. of Finance at the right level" about PRSAs. We can all rest soundly in our beds with Mith about - Ireland's Superhero.
The fact that Stakeholder pensions in the UK have been a complete failure, that almost all providers have pulled out of the market because it is unprofitable must send some message even to Mith. And that's a market of some 20 times ours. Maybe Mith should give Gordon Brown the benefit of his limitless wisdom.
Even allowing for the contribution anomoly between Personal Pensions and PRSAs, there are very few self-employed contributing at the max such that the difference will be relevant ( save for Tribunal Barristers).


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## Bill Clinton (10 Dec 2002)

*George Bush*

Hi Georgie, leaving aside the humour, I'd go with Mith on this one. A tax advantage is a tax advantage. With very many breaks gone in the budget, there will be many 30 to 50 year olds who will top slice 30% of income to PRSA's. Mith is spot on, on the possibility of misselling, and whatever you or I might feel, he knows the market.

As for contacting the Dept of Finance that is precisely the place to take the warning. It is in their hands to equalise the tax code. Leaving complex tax differences just plays into advisors hands. I hope he gets a result. Get on there ye boy ya.


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## Wolf (11 Dec 2002)

*Prsa's*

This might be outdated but:

'Any existing defined contribution personal pension, AVC, executive or group pension may choose to transfer to a PRSA by mutual agreement of all parties to the contract and subject to any regulations.

Before a PRSA provider can accept a transfer from a scheme to a PRSA, the individual requesting the transfer must be issued with two documents: 

- A certificate setting out a comparison of the benefits which may accrue from the scheme and which may accrue from the PRSA. 
- A written statement of the reasons why such a transfer is or is not in the interest of the individual. 

The scheme trustees are responsible for providing the information on benefits which may accrue from the existing scheme.' 

I suppose what they could do is allow a person to 'top up' their existing annuity contract with a PRSA to bring them up to the max for tax relief. That is, if the anomoly stays.


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