AVC - Lost Money Last Year, One Off for 2019?

nickjohn

Registered User
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Balance 12 months ago = €73K
Contributions in 12 months = €15K
Total should be €88K

Actual Value €84K

Loss €4K

Why would I bother making any additional AVC lump sum for 2019 now?

(I do off set one off AVC against rental income but apart from that is there any reason to throw good money after bad or am I missing something?)

Nick
 
Investments go up and go down over any per period. I certainly would not base any future investment decision on any 12 month period. AVC investments are generally longer term (you did not state when you are due to reach retirement age), so over any short term period there will be periods of good returns and periods of bad returns. What Fund was the money invested in?
 
To help do a sanity check on the numbers:

1. Was the €15k invested in equal amounts of €1,250 per month for 12 months?

2. Do you know what the fees and charges are on your pension? Is there an Annual Management Charge (AMC)? If you are making regular contributions, what % of your monthly contribution is actually invested into your fund? Is it 100%? 95% etc?
 
Balance 12 months ago = €73K
Contributions in 12 months = €15K
Total should be €88K

Actual Value €84K

Loss €4K

Why would I bother making any additional AVC lump sum for 2019 now?

(I do off set one off AVC against rental income but apart from that is there any reason to throw good money after bad or am I missing something?)

Nick

If you didn't switch it to cash or take the money out, it is only a paper loss. Like the value of your house would have fallen during the last recession. If you didn't sell it at the time, the value would have come back. Same with most pension funds. In the last 12 months, the global economy effectively shut down, so I don't know how you expected things to be rosy. There was a fall of -35% in just 1 month. Also, if you are making monthly contributions, some of those premiums have just been invested. The october contribution has been invested for just 2 week, the september one for for just 6 weeks etc.

Also, pension contributions are made against earned income. Rental income is not earned income and therefor not eligible to make pension contributions against.


Steven
www.bluewaterfp.ie
 
1. Was the €15k invested in equal amounts of €1,250 per month for 12 months?

AVC One Off of approx. €7500, Balance of €7.5K throughout year. This was Employee, AVC and Employer.

2. Do you know what the fees and charges are on your pension? Is there an Annual Management Charge (AMC)? If you are making regular contributions, what % of your monthly contribution is actually invested into your fund? Is it 100%? 95% etc?

100% Allocation, .36% management fee. Irish Life Active Global Equity Fund.

3. pension contributions are made against earned income. Rental income is not earned income and therefor not eligible to make pension contributions against.

True, however part of my salary / package (bonus, car, health) is not included by employer for pension. When doing tax return I make AVC and this reduces overall tax liability including on rental.
 
You may have a case to feel aggrieved here.

Looking at the FTSE / MSCI indices for developed markets from 1 Oct 2019 to 30 Sep 2020, on a total return basis the indices are up around 10 to 11%.

If I look on the Irish Life website at the Dynamic Global Equity Fund, on the same time period, the fund is -9% approx. This may not be the exact fund you are in but is probably a reasonable proxy.

I think the key word in your post above is the word "Active". Sitting on your hands in that period was the superior strategy. Being active, not so much.

The investing principles as expressed by Conan and SBarrett are correct.

That being said, trustees of pension schemes should always be alert to the investment choices offered to their members and the performance of their fund providers relative to competitors. I am not sure if this applies to your situation.
 
I’m not sure that’s the case at all. My sense is that “active” has done quite well. People forget that with “passive” you own swathes of the market that have done nothing; banks, oil, etc
 
Balance 12 months ago = €73K
Contributions in 12 months = €15K
Total should be €88K

Actual Value €84K

Loss €4K

Why would I bother making any additional AVC lump sum for 2019 now?

(I do off set one off AVC against rental income but apart from that is there any reason to throw good money after bad or am I missing something?)

Nick
Have you factored your tax saving into those figures and are you in the higher tax bracket? Might look more like this if you are -
Balance 12 months ago = €73K (cost €36k before tax)
Contributions in 12 months = €15K (cost €7k before tax)
Total should be €88K (€44k before tax)

Today's Value €84K

Profit €40k

Well worth making further contributions based on those calculations if they're correct and you haven't hit your limit for that year imho.
 
I’m basing it on my own portfolio I guess (which I don’t manage).
If you think about it, the average passively managed euro will always outperform the average actively managed euro, after costs.

That's just maths.

And it holds true in all market conditions; over all time periods.
 
If you think about it, the average passively managed euro will always outperform the average actively managed euro, after costs.

That's just maths.

And it holds true in all market conditions; over all time periods.

What about indices where it might be easier to outperform? I’m thinking about the FTSE for example. If I own the index, I have lots and lots of legacy ‘old world’ stuff. I own a bit of Finsbury, for example, that knocks it out of the park year on year.
 
100% Allocation, .36% management fee. Irish Life Active Global Equity Fund.

Irish Life's funds are rubbish when compared to their peers. The attached graph compares that fund to other equity funds over the last year. They are miles behind. Their index global equity funds don't track the MSCI like everyone else, they have their own index and still have a massive tracking error to their own, self made benchmark. And it's not for the good either, they underperform it. They are by far the biggest player in the Irish market, especially with group pension business. All those members of pension schemes are losing money each year with those funds.

Steven
www.bluewaterfp.ie

5021
 
This graph is going back to June 2012 (I took out the Aviva fund as it started in 2017 which isn't a decent history).
View attachment 5022
That paints a fairly different picture to the previous post doesn't it? From reading this one, the Irish Life funds would be one of the top performers if you happened to be retiring in any of the years included prior to 2020.

I went from being delighted with my choice of Zurich based on your first graph, to being concerned by my choice in the second where Zurich languished for years and then pulled it back in 2020. (Looking at the Zurich Dynamic lines btw)
 
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