Converting my AVC's to an ARF

C

Countrywideflam

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Hi Guys,

I am currently contributing to AVC's through Zurich, Prisma 2.

It is my intention when I retire in 6/7 years from now to set up an ARF, I am a member of the Single Public Service Scheme.

Do I have to come out of my AVC fund Prisma 2 when I change over to the ARF or can my funds remain as invested now?

The reason I ask is, if they can remain as currently invested would I not be better off putting my AVC's into a riskier fund because they are going to remain in there for the next 15/20 years or more?

thanks in advance for the advice
 
The AVC plan will have to be closed, the money will move to cash and then units can be bought in Prisma 2 or whatever fund you like in the ARF plan. Life companies do not do in specie transfers. It shouldn't make a difference to your long term investment strategy though.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
I absolutely agree, but to move now to a riskier fund 7 years out from retirement, I am not sure, if it had been the case that I could remain in the same fund at ARF stage I would have no hesitation,
 
Countrywideflam said:
I absolutely agree, but to move now to a riskier fund 7 years out from retirement,
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In many cases people will be rolling a pension/AVC into an ARF (or vested PRSA) - having taken the relevant tax free lump sum - rather than buying an annuity. So retirement isn't the cliff edge that it commonly was in the past when an annuity was the only or more common choice. In which case the investment timeframe isn't 7 years but 7 + your retirement years...
 
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ClubMan said:
In many cases people will be rolling a pension/AVC into an ARF (or vested PRSA) - having taken the relevant tax free lump sum - rather than buying an annuity. So retirement isn't the cliff edge that it commonly was in the past when an annuity was the only or more common choice. In which case the investment timeframe isn't 7 years but 7 + your retirement years...
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thanks Clubman, I will contact Zurich to see if it is possible to roll the AVC's forward and remain invested in the same fund, if it is the case, I will change the fund I am in
 
AVC = Pre-Retirement Product
ARF = Post-Retirement Product

Two distinct contracts so you have to select the fund on the 'new' contract.

You could also vest the PRSA (stay in same products minus the tax-free cash you take) but it's likely that you you might get a better AMC on an ARF. It depends.

All funds on ZL AVC are available on ZL ARF.

If you're in (say) International Equity Fund (identical Other Ongoing Charges cost on both contracts) on AVC and want same fund on ARF then that's fine. There is no spread. You'd have to go out of your way to buy a pension product with a bid/offer spread on it. You should be able to buy, without difficulty, an ARF with 100% allocation. You might have early exits (ony applicable to transfers, not withdrawals) on the ARF (depending on where you buy it).

If it's an internal transaction, you mature the AVC today and sell at the bid price at close of business tomorrow. You buy the ARF units at bid price on same day. No 'loss'.


Gerard

www.prsa.ie
 
@AJAM Not everyone with public sector pensions will have full service or anything like it. That portion of their retirement income that is a defined benefit may be modest.
 
ClubMan said:
In many cases people will be rolling a pension/AVC into an ARF (or vested PRSA) - having taken the relevant tax free lump sum - rather than buying an annuity. So retirement isn't the cliff edge that it commonly was in the past when an annuity was the only or more common choice. In which case the investment timeframe isn't 7 years but 7 + your retirement years...
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Since the TFLS is a % of fund value, is this not a consideration with switching to a risker fund closer to retirement?
 
TRS30 said:
Since the TFLS is a % of fund value, is this not a consideration with switching to a risker fund closer to retirement?
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Yes it's a consideration but there are other potential options to mitigate the risks of any cliff edge - e.g. fragmenting a pension into different policies and retiring smaller amounts at different times so that retirement isn't a one time "big bang" event but more of a phased process. In the general case I think that not being invested significantly or fully in equities 7 years out from a nominal retirement rate is probably too conservative and unnecessarily throttling potential medium/long term returns.
 
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AJAM said:
you are in the situation where a large part of your pension is Risk Free.
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I quibble.

It’s more that your retirement income is tied to the fiscal capacity of the Irish state. Retirement pensions have been cut in the past.

Someone in the OP’s situation should have as much of their retirement savings invested in the UK, US and further field in my view.

But the broader point is correct that a public service pension is basically free insurance.
 
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