Evaluating which company pension to go with

U

Unregistered

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My company gave me the option of the following pension plans.

Irish Life Consensus Managed Fund (currently have 100% contributions going into this one)
KBC Managed Fund
KBC International Equity Fund
KBC Fixed Interest Fund
KBC Cash Fund
Irish Life Global Acccess Fund

I can switch between plans on a quaterly basis. I am totally ignorant of these plans and the differences between them. Consequently, I would be grateful if anyone who has a deeper understanding of pensions could tell me how I can evaluate which one is best.

When I joined the scheme back in Jan04, the one i went for Irish life consensus managed fund - was supposed to be the higher risk of the lot....but i just googled it and found a review which said it was low-med. risk ([broken link removed]

By way of background information, I am 31, playing catchup from a pensions point of view as i have been self-employed/out of the country & working cash in hand/student up till this point. I have only clocked up 2 years of tax paying employment in Ireland - and this didnt involve a contributory pension scheme. I am paying an extra 8% of base salary (29k) in voluntary contributions & employer is matching those contributions up until an additional 3%.
 
Some comments

  • What are the charges and are they the same regardless of which provider/fund you choose?
  • At age 31 you should most likely look towards investing in a high risk/reward high equity content fund. After all you will be saving through your pension for two or more decades. I personally reckon that a consensus fund it probably too conservative.
  • From the information posted you seem to be on 20% tax only so you should be aware of the caveat of saving now and getting 20% tax relief only to potentially pay 42% (or whatever the high rate will be then) on pension income. On the other hand you can avail of a 25% lump sum tax free so I personally wouldn't necessarily use this as a reason for 20% taxpayers not to save through a pensio at all especially when the employer is offering to match contributions up to some limit.
  • Past performance is no guide to future returns.
  • Has your employer engaged a pension consultant to help guide employees in making choices appropriate to their particular circumstances?
 
"What are the charges and are they the same regardless of which provider/fund you choose?"

Good question...I was just pondering this earlier...will find out and repost.
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"At age 31 you should most likely look towards investing in a high risk/reward high equity content fund. After all you will be saving through your pension for two or more decades. I personally reckon that a consensus fund it probably too conservative."

Ok, so your suggesting that I go with the high risk on the basis that if it doesnt perform, I have time left to make up for it right? Is there a site which compares funds like the ones listed - one thats independent/unbiased in its reviews..?
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"Has your employer engaged a pension consultant to help guide employees in making choices appropriate to their particular circumstances?"

They have a point of contact in the HR dept. for all queries related to company pensions - as far as I know, she would not be a pension consultant though...just an administrator.
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"From the information posted you seem to be on 20% tax only so you should be aware of the caveat of saving now and getting 20% tax relief only to potentially pay 42% (or whatever the high rate will be then) on pension income. On the other hand you can avail of a 25% lump sum tax free so I personally wouldn't necessarily use this as a reason for 20% taxpayers not to save through a pensio at all especially when the employer is offering to match contributions up to some limit."

I should probably give a little more info...

Base Pay: 21,450
Shift Premium: 7,552
Bonus 2,375
Overtime 9,310

The base pay and shift premium are constants. The Bonus/Overtime are not - and by all accounts may not be there this year (we shall see how the year goes). So....last year i was on 42% tax at times.
Now, how do I equate at what point its no longer beneficial to throw money at the pension?

I should also throw into the mix that i'm about to start a mortgage (125k over 30/540 per month).
 
Unregistered said:
"At age 31 you should most likely look towards investing in a high risk/reward high equity content fund. After all you will be saving through your pension for two or more decades. I personally reckon that a consensus fund it probably too conservative."

Ok, so your suggesting that I go with the high risk on the basis that if it doesnt perform, I have time left to make up for it right? Is there a site which compares funds like the ones listed - one thats independent/unbiased in its reviews..?
Click to expand...

That's just my opinion but would be a general rule of thumb for somebody of your age all things being equal (e.g. no etxtreme aversion to risk/volatility over the period in question etc.). Other than charges I'm not sure that any comparison of the funds makes much sense. Certainly past performance would not since it is no guide to future returns.

"Has your employer engaged a pension consultant to help guide employees in making choices appropriate to their particular circumstances?"

They have a point of contact in the HR dept. for all queries related to company pensions - as far as I know, she would not be a pension consultant though...just an administrator.
Click to expand...

OK - you might consider getting so.

Now, how do I equate at what point its no longer beneficial to throw money at the pension?
Click to expand...

I'm not sure that there is any hard and fast rule or even a generally applicable rule of thumb unfortunately.

I should also throw into the mix that i'm about to start a mortgage (125k over 30/540 per month).
Click to expand...

Your first priority should probably to get this down to a manageable level first - this means different things to different people. Do you mean 30 year term? Have you considered taking a shorter term to minimise the overall interest and mortgage protection life assurance costs?

Based on what you've posted I'd be inclined to prioritise the mortgage and perhaps just contribute as much to the pension to maximise the employer contributions for now and then increase the pension contributions at a later date. Oh - and obviously maximise your SSIA if you're not doing so already. You can always use the maturing fund to make a lump sum pension or mortgage (or both) payment when the time comes.

Please note that these are just personal opinions based on no particular expertise in this area and also on only partial information that you have posted. If in doubt get independent, professional advice.
 
Thanks for that clubman.


"Do you mean 30 year term? Have you considered taking a shorter term to minimise the overall interest and mortgage protection life assurance costs?"

Yes thatsa 30 yr. term. Would prefer a shorter term but I don't see that its feasible just at the moment (don't want to put too much pressure on myself initially) - but I am working on the basis that I can be organised and disciplined enough to throw in extra payments as I go along if I find that i'm in a position to do so.
Thankfully, the mortgage protection insurance is coming in fairly cheap at 120/year.
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"Oh - and obviously maximise your SSIA if you're not doing so already. You can always use the maturing fund to make a lump sum pension or mortgage (or both) payment when the time comes."

I was out of the country when the SSIA deal kicked off...so missed the boat there..
 
Fair enough on both counts so. Stick around as other people may have other opinions, including some that differ from mine, too. :)
 
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