Advice on new company pension scheme I'm setting up

Hi all

I've been asked to set up a company pension scheme and I've gone through the rounds of quotes from brokers and pension providers and I'm about to make a decision.

I just want to check on the charges for the scheme and see if they are reasonable and can I negotiate further.

The annual management fee is .75% per annum. The allocation rate is 97.5% (originally 95% but I haggled, see below).

Policy fee is €4.29 per month.

Loyalty bonus of .5% per annum after 10 years.

Does all this seem reasonable....it's with AIB Ark Life.

I used the example of a sample pension with total contributios of €8,200 per annum for 30 years, 6% growth and indexation of 3%....gives an estimated pension fund of €825,000 at 65.....it was the best fund value of the lot....but only after I showed them my other quotes and they changed the allocation rate to better all the others.

The next best was Friends First at €824,000.

Any thoughts or opinions....?

How many people in the company?

Estimated total contribution (annual)?

What is the annual fund management charge?

About 200 but initially about 20 people signing up.

Estimated annual contribution for all would be €40,000-€45,000.

Annual fund management charge as mentioned is .75%.

Sorry - I missed that!

Yea so you would pay about €1,150 to Ark Life (indirectly through 2.5% contribution charge) for the admin service.
The annual management fee will cost about €500/year a year in early years.
I think it is a good deal.

If you were to go Self-Admin you would probably pay about €4k/year admin charge, you would have a lower annual fund management charge (more noticeable when fund eventually gets large, like > €500k), and you would have more investment freedom.

This way you are tied to Ark Life's investment manager - AIB Investment Managers.
If it is not for your own pension - just for the employees of company - I would say it sounds good.

Thanks for the reply.

I'm setting it up to be both my pension and for other employees, although there will be different classes of employees for which different options apply.

I intend to put a minimum of €8,200 per annum in. I've paid off my mortgage and intend to get even more agressive on the pension.

With my SSIA maturing in November I'm considering investing some of that in my pension. As I pay tax at 42% and am above the €50k income limit for the the government scheme for the maturing SSIA's to pensions I'm considering the following.

Say I want to invest €12,500 into the pension. Would I be better off paying €1,250 a week for 10 weeks from my salary, thus getting the tax relief instantly and saving employee PRSI and living off the SSIA for those 10 weeks...using the net amount of €1,250 as my "pay". Also when I would be earning again I would have 10 weeks tax credits built up.

Is this better than paying €12,500 directly before 31st October and nominating it for last year.

Anyway...gotta go...leaving work and will be back tomorrow.

thanks

I hope that ther is good Fund Choice with AIBIM, if you are going to start putting that kind of money in annually, you need to have a range of funds from which to choose.

It really makes no difference which strategy you use (except by backdating the €12.5k for 2005 it just means you can still put in more to 2006 than if you did not backdate for 2005...but it is a company scheme anyway so the company can put in much much more than the usual "Age-related" limits for you so that point is pretty minor).

Thanks for the response.

From the blurb I've received from them there appears to be about 12 different pension funds to invest in.....each one using different criteria....be it attitude to risk, length to retirement, location of stocks etc.

Is there any independent list of what are the best performing funds and type of fund...?

Thanks

The pension consultancies (such as MERCER and HEWITT) produce independent investment manager "League Tables" every quarter (Jan, Apr etc)...these reports are usually reported on in The Irish Times Biz section shortly after they are issued, so unless you're a client of one of the consultancies you will probably have to keep eye out for articles in The Irish Times.

I must go digging....off the top of your head how do AIB IM perform...?

They are doing better recently, they are last of about eleven Irish managers over the last ten years, and second last of about twelve Irish managers over the last five years...but they do seem to be improving!

That doesn't fill me with glee.....maybe i'd be better to opt for Friends First, the next best quote.

Thanks for your help.

No probs - past performance is no guarantee of future performance etc etc...but you could do worse than have a chat with Eagle Star.