Amount actualy invested

Just a quick query i was hoping someone could clear up for me. Am in my company's pension scheme and am trying to work out charges etc about the scheme

Details are as follows:

Company contribute 10% of my salary and I put in 5% (roughly €320 monthly)
Charges, €4.44 monthly fee, 0.75% annual management fee
Company that pension is with has 5% bid/offer spread.

Just wondering how much of my contributions are actually been invested.

Any other info needed just shout.

Cheers

Presumably...

Gross monthly contribution: €320
Less bid offer-spread of 5%: €304
Less monthly policy fee of €4.44: €299.56
Net monthly contribution (actually invested): €299.56

The annual management fee of 0.75% is calculated on the full value of your fund and then deducted. This is usually not done once a year but may be done daily on a pro rata basis (e.g. (fund value x 0.75%) / 365)) and reflected in the quoted (bid) price for units of the fund.

Does that make sense to you? For what it's worth it would be nice to avoid/reduce the 5% bid offer spread but those charges do not seem outrageous for an occupational pension fund (or is it a PRSA?) and the 10% employer contribution is quite generous since they often only match employer contributions up to something like 5%-8%.

Thanks Clubman

Yes, is a pension scheme and not a PRSA.

Didn't think that the company had a bid/offer spread but was on their website this morning looking at fund performance and say that it had. Was a bit disappointed as is 5% gone straight away.
Company actually pay 6% and match first 4% employee pays, hence the 5% i throw in. Was thinking of increasing this amount but was sure if i was able as still under 30(not for long!!)

Could you confirm that the revenue limits are for total contribution or just the employee part. Also does the increased 20% become available when i hit 30 or at the start of the year that i turn 30 ?

Could you confirm that the revenue limits are for total contribution or just the employee part. Also does the increased 20% become available when i hit 30 or at the start of the year that i turn 30 ?

15% under 30, 20% in the year that you turn 30 and up to aged 40. See . The Pensions Board website also contains some useful information.

Re: Amount actually invested

Thanks again Clubman.

Was able to see where it said that the relief related to just my contributions but couldn't see anywhere it said about if the increase was when I hit 30 or the start of that year. I see you said start of the year in your reply. Did I miss this in one of those links or is this just something that you know ?

Was thinking of increasing my contributions as is the most tax efficient way to save but now that i know am losing 5+% am having second thoughts.

any thoughts ?

Re: Amount actually invested

I see you said start of the year in your reply.

I'm going by answer to a similar query .

Was thinking of increasing my contributions as is the most tax efficient way to save but now that i know am losing 5+% am having second thoughts.

As I said it is possible to get lower charges but yours are not the worst. I certainly wouldn't forego availing of the employer contribution.

any thoughts ?

Not sure if it's possible to contrbute to the occupational scheme and make AVCs (Additional Voluntary Contributions) through a PRSA on "standalone" basis since you can get Standard PRSAs with even lower charges (maximum is 5% on contributions and 1% annual management charge but 0%/1% is possible for a once off arrangement fee). In such a situation you would have to as opposed to getting it "at source" through contributions deducted/remitted through payroll.

Note that I am assuming that pension savings is your priority at the moment and that you don't have more pressing uses for your money such as clearing high cost debt or saving for a house. Feel free to post more details about your wider personal/financial circumstances if you like.

Hope this helps.

Re: Amount actually invested

Thanks just read that link.

Will not get any more employer contrition than what i get now as they only match the first 4% which i am already putting in.

I though you couldn't have a PRSA if you are already in a company pension scheme, unless you have a second source of income to fund it.

Sorry as soon as stuck up "any thoughts ? " realize i should have put up a few more details.

Mortgage is manageable, about 35% of net income.
Car loan of €11K over 5 year at 3.1%
Max SSIA, equity based

Still have a bit extra each month so like to put it in pension or some saving. Not too worried about increasing mortgage as interest rates so low so only saving 3.1% if pay mortgage off quicker. Think will get better return with pension and avail of tax relief as well. Just unsure now as extra charges wasn't aware of.

Any other info needed just shout

Re: Amount actually invested

I though you couldn't have a PRSA if you are already in a company pension scheme, unless you have a second source of income to fund it

That's quite possible. I'm just not up to date with the current rules. Best to check the Pensions Board website.

Car loan of €11K over 5 year at 3.1%

Are you sure that the car loan APR is 3.1%? It seems very low. Some mortgage loans are more expensive than that so I can't see how an unsecured loan would be coming in around that price point.

Your finances certainly seem to be in order so there are no obvious other urgent issues to be addressed so it's largely down to preference as to where you want to direct excess disposable income. Have you read the (follow the links) on the sort of things to consider when making choices in this sort of context?

Re: Amount actually invested

Will not get any more employer contrition than what i get now as they only match the first 4% which i am already putting in.

Click to expand...

I thought you said the employer was contributing 10% - Can you clarify?

Didn't think that the company had a bid/offer spread but was on their website this morning looking at fund performance and say that it had. Was a bit disappointed as is 5% gone straight away.

Click to expand...

Don't assume that the charges quoted on the website are the same as the charges that apply to your fund. The fund managers may well offer different charges to different pension funds. If your pension fund has a large number of members, you may be getting a better deal on fees. Check with your pension trustees for exact fee details.

Re: Amount actually invested

Sorry for delay in replying, crazy couple of days !!

Just to clarify a couple of points.

Company automatically put in 6% of salary regardless of what employee does. They also match up to first 4% of employee contributions. Hence 10% in total. Hope that explains.

Car loan is secured on house but have 80K equity so wasn't too worried about adding 11K as get 3.1% or 3.17% APR. Have mortgage and car loan at same rate but paying car loan over 5 years.
As i said earlier, paying extra off either is only really getting me a 3.1% return and think that must be possible to do better than that.
Good point Rainyday, have made some inquiries to HR in relation to pension charges so will see what they have to say.

Re: Amount actually invested

Just though would let you know HR got back to me and said due to the number of people in our company scheme we do not pay the bid/ offer spread. So only charge is €4.44 monthly policy fee. Everything else gets invested.

Cheers Rainyday, glad I checked now.

Another question for you. Am thinking of changing my SSIA as is equity based as is my pension fund and am worried about having too much exposure in one area. Is this worth worrying about as SSIA is only going for 2 1/2 more years and pension is obviously long term ?

Re: Amount actually invested

You should review some of the topics in the SSIA forum about the sorts of things to consider when thinking of switching an SSIA from equities to deposits and vice versa. For example why did you choose equities in the first place and what has changed in the meantime to make you think of switching? I would not really compare an SSIA with a pension investment since the SSIA will be for five years (or more if you decide to roll it over into another investment - and who knows what, if any, incentives the Government may provide to encourage people to keep investing or rolling it into a pension etc.) while the pension will generally be for decades. If you have some stomach for risk/volatility, do not have major problems with cashflow, and might be able to roll your maturing SSIA over into another investment if required then I would be inclined to recommend that you stick with the equity based SSIA. Alternatively if you are not happy with the current risk/volatility then perhaps your SSIA offers less risky/volatile funds than the one in which you are currently invested (e.g. a cash/bond fund) which might obviate the need for switching to deposits? As ever you should check that the charges on your SSIA are reasonable.

A proper assessment of your situation and informed recommendations would only be possible with much more detailed information about your circumstances and should really be done by an .

Re: Amount actually invested

Thanks Clubman.

SSIA is with Canada Life. Am in the Setanta Strategic Growth fund. Has returned about 9/10 % the last couple of years(not sure if that net of Charges, waiting to hear). Annual fund management fee is 1.75%, a bit high i know but get 102.5% allocation. € 2 monthly policy fee. Don't think charges are too bad especially with extra allocation.
The fund is in 65% equities, 10% Irish, UK and 20% Euro and US. Rest is mainly Guilts 29% and cash 3%.

Am waiting for breakdown of pension fund but know it will be heavily equity based as got 30 years to retirement. Not too worried about the pension as is long term and equities will always win out. Guess am more concerned about the SSIA as a world wide down turn in the next couple of years could wipe out growth made so far. I know the extra Government contribution should ensure a positive over all return still am worried about having circa 75/80% of savings in equities even if worldwide. Is that a reasonable amount for a 30 year old with no wife, kids etc ?

Re: Amount actually invested

am worried about having circa 75/80% of savings in equities even if worldwide. Is that a reasonable amount for a 30 year old with no wife, kids etc ?

It really depends on the individual and the wider financial circumstances. Assuming that you are in relatively stable employment and have no major debts and/or cashflow issues then I personally reckon that having both your pension and SSIA in equities is not unreasonable. Particularly if you have the flexibility of extending the investment of the SSIA funds after maturity if, for example, you don't immediately need the money or the value of the fund has dipped so that you might want to sit tight to recover any losses. On the other hand if by "worried" you mean that your overall investments in equities bothers you on a daily basis then it may be that the risk/volatility involved is too much an perhaps you should move your SSIA to a less risky/volatile haven (e.g. a more conservative equity fund, a cash/bond fund or a deposit SSIA) at the expense of possibly missing out on better growth.

Have you read the AAM and guides to savings and investments to review some of the issues to consider when it comes to short (e.g. "emergency" cash fund or short term purchases), medium (e.g. SSIA or longer term purchases) and long term (e.g. pension, house) savings and investments? If in doubt get independent, professional advice as mentioned earlier.

Out of curiosity do you own your own home and, if so, what mortgage and term is outstanding, do you have any other debts, do you have any other savings? Feel free to answer or not as appropriate.

Re: Amount actually invested

A quick financial over view would be,

Own an apartment worth circa €325K with mortgage of €240K over 30 years at 3.1%
Car loan of €11K over 5 years at 3.1%
No other loans, nothing on credit cars, nothing on overdraft.
Have VHI, €120K life cover and Serious Illness cover through work. Get staff rates on Mortgage Protection and Motor insurance for above.
MAX SSIA as per earlier post and 14% of salary going into pension. Got 2 months mortgage payments sitting in Credit Union.
Job is pretty secure, been here 2 1/2 years and company is growing at a steady rate. Is a subsidiary of one of the largest financial companies in the world.

Have read most of the Guides and read most of the discussions on the various themes on here. Also use to work in the industry for a for a few year. Am always slightly skeptical of "independent" advice. My main concern is that one of the major points mentioned on here is to spread your risk around and not concentrate too much on one class ie property, equity etc. Feel that maybe 75/ 80% of savings in one class is very high but maybe in my situation is not ??

Re: Amount actually invested

Am always slightly skeptical of "independent" advice.

A good multi-agency intermediary or (arguably) better still an authorised advisor should give truly independent advice - unlike a tied agent salesperson who most likely just give a sales pitch.

My main concern is that one of the major points mentioned on here is to spread your risk around and not concentrate too much on one class ie property, equity etc. Feel that maybe 75/ 80% of savings in one class is very high but maybe in my situation is not ??

But aren't you actually more heavily invested in property by virtue of the apartment that you own even if it is your PPR? Many people forget to factor their house into the equation when reviewing their finances. Even if it is not that liquid an investment and is the place in which you live it should be included.

I personally don't think that you are going over the top with your equity investments particularly when you seem to be in a very healthy financial situation overall. However if you continue to have doubts about your equity investments then perhaps something less risky/volatile is indeed for you. One sure way of getting a guaranteed return would be to reduce your level of debt even if it is low cost.

Re: Amount actually invested

A good multi-agency intermediary or (arguably) better still an authorized adviser should give truly independent advice - unlike a tied agent salesperson who most likely just give a sales pitch.

I think should is the major issue.

But aren't you actually more heavily invested in property by virtue of the apartment that you own even if it is your PPR? Many people forget to factor their house into the equation when reviewing their finances. Even if it is not that liquid an investment and is the place in which you live it should be included.

Have never been too sure about including your PPR in over all investment strategy. On one hand it is increasing in value and is an asset but on the other hand wasn't something I bought to make money on as such but was more out of necessity of having to have somewhere to live.

Since posting earlier have got some more info in relation to fund performance, asset split. SSIA is performing 5.25% YTD and about 7% over all since inception. Pension is 8.6% YTD and about 11% since inception. Both are net of management fees. Also equity split on pension fund is lower than i though at about 65% and a pretty even split across regions.
Because of these returns am loath to increase mortgage repayment to gain 3.1% return.
To be honest think am going to lob more into the pension. With the good returns, lower equity split that i though, no bid/ offer spread and tax relief, can't really be beaten.
Taking the apartment into account and the good spread of equities, think I can sleep soundly at night !!

Thanks for the advice Clubman, always nice to bounce your though soff someone else, who obviously knows what they are talking about, to see what they think.

Re: Amount actually invested

On one hand it is increasing in value and is an asset but on the other hand wasn't something I bought to make money on as such but was more out of necessity of having to have somewhere to live.

I appreciate that but don't forget that as you build up increasing amounts of equity in the property by paying down the mortgage and/or it appreciates in value it is an investment in which you have equity locked up which can be released in certain situations (e.g. an equity release remortgage or collecting a CGT free gain when trading down etc.). It can also be used as collateral/leverage for geared investments if necessary (not that I'm necessarily recommending this course of action).

Also equity split on pension fund is lower than i though at about 65% and a pretty even split across regions.

In my opinion if you have more than about a decade to go to retirement then you should really be invested mostly or fully in equities as a bet on best long term performance albeit with a higher risk/reward profile than more conservative fund splits. As ever what is appropriate depends on the individual but the very long term nature of pension investments means that uneasiness about risk/volatility should not necessarily blind one to the long term aspects and potential of investing in higher risk/reward funds.

To be honest think am going to lob more into the pension.

If you are already maximising your contributions to the relevant then are you sure that this is the best way to go?

Thanks for the advice Clubman, always nice to bounce your though soff someone else, who obviously knows what they are talking about, to see what they think.

Thank you but don't forget that , just an interested punter!

Re: Amount actually invested

In my opinion if you have more than about a decade to go to retirement then you should really be invested mostly or fully in equities as a bet on best long term performance ..........

Would agree with you here. The SSIA I think is a good split as is only medium term (depending on what options available after 5 years).
The pension I think might be a bit low as I have 30 years to retirement and 65% in equities isn't that high. Think I will get in touch with the fund managers and see what their thinking is on the asset splits.

If you are already maximising your contributions to the relevant age related tax relief limits then are you sure that this is the best way to go?

As hit 30 next year (!!!) limit goes up to 20% in New Year so will be able to increase and still stay in limits.

Thank you but don't forget that I am not a professional, just an interested punter

To be honest Clubman nearly prefer listening to "interested punters" than so called "professionals" . Have been following the site for awhile and seen you post on all different type of topics and in a very general and unbiased manner. Never remember seeing you recommend a company or product over any other. Assume you don't work for an financial company so would consider people like yourself and rainyday (to name a couple) more independent than most.

Re: Amount actually invested

Thanks for the compliments. I don't work in finance in any capacity (I'm a humble programmer for my sins ) but most of the people who do and who contribute to AAM are also pretty objective and unbiased as well.