Bank of Ireland funds

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January25

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A relative is 53 and has no mortgage or debts. Not worried about kids or college. Has a good emergency fund. No pension other than public sector. Hopes to take actuary reduced pension at 60. The pension might be 70 k at that time given pay rises. He has been told to hold off doing AVCs as he could end up paying chargeable excess tax. He knows some of the thresholds may or may not rise. So he was looking at BOI funds. Maybe save 1000 a month. Balanced managed fund was suggested by the advisor. Plus they are giving 3% on a lump sum to start. However the management fees are 1.6 % or more. Hard to see them listed in one place as you have to go into each KID. Just wondering if there are any similiar funds with less fees ? He already pays into a Zurich fund for future children’s expenses. Just wondering what people might suggest with BOI or elsewhere ?
 
This probably really needs a Money Makeover to deal with properly but...
January25 said:
Hopes to take actuary reduced pension at 60. The pension might be 70 k at that time given pay rises.
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If they're likely to be in line for a pension of €70K p.a. (?) from age 60 then they can very likely afford to take more risk with their savings over the next 7+ years than this:
January25 said:
Balanced managed fund was suggested by the advisor.
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Why BOI? What advisor?
January25 said:
Plus they are giving 3% on a lump sum to start.
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You mean a 3% bonus - i.e. an additional €3 for every €100 invested? I would expect that to come with strings attached such as some sort of clawback and/or early encashment charge.

1.6% AMC isn't very competitive.
 
Would be useful to know what public sector pension scheme they are in. Unless the financial adviser has done all those calculations already, there is nearly always scope to make AVCs that can be invested in funds with lower charges and avail of tax free growth. There is a lot of information about making AVCs in the Single Public Sector pension scheme thread that is useful even if not in that scheme.
 
It was a bank of Ireland advisor. Yes I think there are encashment clauses reducing over 5 years. But he is unlikely to need the money so hence the concern is the AMC and if there are alternatives that someone can suggest. He doesn’t need a money makeover just advice on where to put 1000-1500 a month to earn some return.
 
Did he use an adviser for the ZL savings plan? What are the charges on that plan? All of them, allocation rate, policy fee, early exit charges and AMC

He went and sought out advice from the BOI tied agent? He needs advice, right? Surely a New Ireland product?
 
He’s designated a post 2004 entrant but will have c 32 years service in around 7 years although he might go part time before that. He definitely doesn’t want to work beyond 60 as the stress is dreadful. Is one alternative a passive index fund ? Say based on US stocks ? If he were to buy monthly through Davy how would this be taxed ? Say something like VFIAX would it be taxed annually on gains or just on encashment ? The AMC on the ZL product is 1.25%. It was set up by an independent financial adviser who I think gets a fee from Zurich so he didn’t pay a fee. He’s not exiting the ZL product early as it’s for kids. It looks like €500 a month goes in. The BOI agent contacted him directly after the manager called him first to see if he would like to discuss investment products.
 
The financial adviser gets paid commission from the 1.25% for the advise he gave your friend.

The tied agent of the bank will get paid a bigger commission from the 1.6% for the 'advice' he's giving your friend.

During the meeting with the bank tied agent the other policy with ZL would have come up as part of a fact find.

It's it remarkable that he couldn't just tell your friend that he could just add the extra money to a product that has a 1.25% AMC instead of trying to sell him a more expensive one with a 1.6% AMC.

Rule No. 1 : Never buy an investment/savings/pension product from a bank.
Rule No. 2 : Never forget rule no. 1

Bank manager is 'just doing his job' of teeing up customers with extra €€€€ in their accounts to buy overpriced products to help banks profits and feed shareholders.
 
I might be wrong but as I understand it even if he retires on 32 years service he could buy "notional service" to get him to 40 years service and thus a public sector pension of half final salary which I guess would be even more than 70k.

Sounds like he is paying lots of tax at 40%. He could use an AVC fund to pay for much of the notional service buy backs.

The value, and security, to him of the extra amount of PS pension, paid to him for the rest of his life, and bought using a tax efficient method invested for 7 years in a low cost index fund might beat any other type of investment.

Alternatively, maybe he will have enough PS pension in 70k so the AVC fund could be transferred to an ARF at his retirement and invested in a low cost index fund of equities and which could be inherited on.

Either way I would confirm what scope there is to make AVCs.
 
Just to note, if the normal retirement age is 65 and you choose to go at 60, you can't buy the five years as notional service if it is possible to work them up if you didn't take early retirement. However, if the normal retirement age is 60, these could be purchased.

I would also say the cost of these years is incredibly expensive, so something to think about. AVCs might be better value depending on all the factors taken in the round. If 32 years service works out at a pension of €70,000, the current salary must be approx 180k a year, so it would be expensive to buy the years.
 
He had a quote to buy notional service at one stage, think it was a huge amount for one year so he decided against.
I take your point about exploring AVCs further but at his last it was said to him to avoid them until more clarity obtained about thresholds.
So should he go back and top up a Zurich fund or set up a new one or go it alone buying index fund through Davy via his stock holding account where he has a small number of shares.
 
January25 said:
So should he go back and top up a Zurich fund or set up a new one or go it alone buying index fund through Davy via his stock holding account where he has a small number of shares.
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It's not an either or issue. Buying shares directly is another option and benefits from lower charges and taxes compared to unit linked funds or ETFs. It's difficult to comment meaningfully without more comprehensive information such as a money makeover would provide.
 
No it’s around 32 years service at 60. Normal retirement age would be 65 hence the actuary reduction. He has a couple of shares but would prefer exposure to a larger no in a passive index. Whilst he will go back to an advisor re AVCs they don’t appear keen with the CET situation. He’s concerned about the economic outlook and the possible impact on salaries or pensions. So would like to do an index fund not an ETF. Which one and by what route/frequency is the question ? He would pay in for 7 years.
 
Apparently if you are not permanent or break your service you are not an entrant. The date of permanent appointment decides the applicable pension scheme.
 
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