Fund choice in ARF pension fund / "life-styling" / transferring ARF?

I am reviewing my father's ARF pension fund, he is aged 76, the ARF is worth maybe 10% of his wealth.

There were two AVCs, one was linked to main pension, one was a PRSA-AVC.

The ARF started with Irish Life in Dec 2008, broker is Cornmarket, 101% allocation.

• Initial sum into ARF = 38,770
• initial fund is Consensus Fund Series V, Irish Life risk code 5/7
• the AMC is 1.50%

Nearly three years later, June 2011, the PRSA-AVC was matured, and added to the ARF.

• Second sum = 24,130
• Second fund is Public Sector Cautious Fund Series V, Irish Life risk code 3/7
• The AMC is 1.53%
• 24,371 went into the fund, so 101% allocation

Neither the parents nor I paid much attention to the fund values until now.

What I did notice over the years was that even after the withdrawal of 5% of the fund as an annual income, the capital value was holding up, or growing. I am now having a better look at the annual statements.

Consensus Fund unit price

• 2009 = 0.876 euro
• 2022 = 2.035 euro
• Growth over 13 years is 132%

Public Sector Cautious Fund Series V unit price

• 2011 = 1.031 euro
• 2022 = 1.296 euro
• Growth over 11 years is 25.7%
• I presume the growth is dragged down as in the initial factsheet, 25% of this fund is in cash, 25% in Govt Bonds

One thing I noticed: the 5% income each year has always been taken from the (better-performing) Consensus Fund. This means this fund has fallen from over 48k units to 16k units. The units in the Cautious Fund are unchanged.

I never noticed this until now, years later.

Total contributed to ARF = 62,900, most recent value = 63,500, after 5% income withdrawn each year


My questions:

Given that my father is reasonably physically healthy, given that the 5% annual income is not needed (it is not spent, it is saved), are we better to do a fund switch? Sell the Cautious Fund, transfer to Consensus Fund

Q1: Could we request the 5% income to be drawn from both funds?

Q2: Or should we switch out of the Cautious Fund into 100% Consensus Fund?

Q3: or switch brokers to get better AMCs?

Q4: or switch broker and insurer? the broker prsa.ie offers 0.75% AMC using Zurich.

I suppose my query fits into the debate on asset allocation in ARFs.
Thanks.

Thanks.

He would save money if the ARF is switched to the broker you mentioned.
Cornmarket are not competitive.
As your father is not depending on the ARF drawdowns for normal living expenses he could consider the higher risk for higher return strategy.

I had a better looks at the original documents:

Consensus Fund

• Dec 2008 = 0.773 euro
• 2022 = 2.035 euro
• Growth over 14 years is 163%

Public Sector Cautious Fund Series V

• June 2011 = 1.031 euro
• 2022 = 1.296 euro
• Growth over 11 years is 25.7%
• I presume the growth is dragged down as in the initial factsheet, 25% of this fund is in cash, 25% in Govt Bonds

This is a good example of the long-run growth potential of a diversified basket of (mainly) shares.

In the new ARF, we will likely do as you suggest, no more Cautious Fund, instead put it into a fund with at least 50% shares, maybe 75%.

My own personal strategy on pensions is very simple

1. Pay the lowest fees possible (over 20+ years even small differences in fees will add up to big numbers)
2. Choose the low cost Indexed World Equity Fund

Now I have >15 years until retirement so 100% equity is fine for me. And the Index world equity fund has consistently beaten the lifestyle/consensus/managed alternatives as you would expect it should because
1. It's 100% Equities (no cash drag, no bonds, no alts)
2. It's usually a lower fee
3. It's diversified, which reduces risk (there's no equity fund that can be more diversified)

But what has surprised me and what you would not expect is that the world equity fund is outperforming the lifestyle/consensus/managed alternatives even in down markets (especially the current one).

Hi AJAM,

What are your thoughts on an asset allocation in the drawdown stage? How much of your total assets (excluding say PPR) would you envisage in equities at that point?

@AJAM

In Zurich, what seems to be the equivalent to your indexed World Equity Fund is Indexed Global Equity (BlackRock)?



Full range:

The Indexed Global Equity (BlackRock) fund size seems small to me?

188m?

"The Indexed Global Equity Fund (BlackRock) is a unit-linked fund that gives you the opportunity to participate in the performance of companies in the developed world. The fund seeks to provide a total return, taking into account both capital and income returns. The fund currently invests in the iShares Developed World Index Fund managed by BlackRock. The iShares Fund is passively managed and aims to track an index, but may not track it exactly. "

Yes that's the fund I'd go for.

188M is just what Zurich have invested in the fund.
The actual fund has almost 5 Billion invested

And if you look at the fact sheet, over the last 10 years it has an annualized return of around 10%.

JimmyB99 said:

Hi AJAM,

What are your thoughts on an asset allocation in the drawdown stage? How much of your total assets (excluding say PPR) would you envisage in equities at that point?

Click to expand...

So, I'll freely admit that I am not an expert on the drawdown stage. Having said that I think a good starting point is the Vanguard lifestyle funds.
They start at 90% stocks and only start to reduce that 20 years from retirement.
At retirement they have roughly 50:50 Stock:Bonds.
5 Years into retirement they have 35:64 Stock:Bonds.
The minimum amount of stock, (even 25 years into retirement), that they have allocated to stocks is 30%.

But I think it also depends on what you are trying to achieve with your pension pot.
i.e. do you intend to use it all up or do you want to leave some behind for your heirs (means you have to add more equity)
Do you have more than enough (you can risk the excess), just enough (be conservative, more bonds), or not enough (have to take risk, more equity).

With apologies for a slight pivot...
Is that Zurich fund (Indexed Global Equity (BlackRock)) available as an option for a Zurich PRSA? It doesn't seem to be according to their documentation.
Irish life seem to have a version of the Indexed World Equity Fund listed with the prefix PRSA, but it *isn't* listed in the funds mentioned in their PRSA booklet.

nephster said:

With apologies for a slight pivot...
Is that Zurich fund (Indexed Global Equity (BlackRock)) available as an option for a Zurich PRSA? It doesn't seem to be according to their documentation.
Irish life seem to have a version of the Indexed World Equity Fund listed with the prefix PRSA, but it *isn't* listed in the funds mentioned in their PRSA booklet.

Click to expand...

No, it's not available on PRSA

Gerard

www.prsa.ie