Meeting with financial advisor today re pension planning...

[GSheehy]

But are you so sure that buying an annuity from another provider will be as good value as directly from the PS employer?

How could I be? How could I know what annuity rates or NS rates will be in 20/30 years time? I'm saying it's an option under current rules.

Maybe the HSE won't have the funds/resources to 'bump up everyone's salary' in 20/30 years time.

If the advisors to the PS Scheme are telling you that an AVC and AVC PRSA are treated differently on the options you might have as regards buying benefts from each product at retirement, then maybe, they want you to buy one over the other. I don't know of any (pensions manual) impediment that favours one over the other. Maybe it's a bit like that line about salary deduction being 'handy' but leaving out the part about the potential cost savings to the customer by doing the alternative.

And, if you are still really concerned about this, in my opinion, misguided anomaly then there's nothing to stop you setting up two separate PRSA AVCs with different policy numbers.

But, again, we've no idea what the pension rules will be in 20/30 years time. We can only work with the rules as we understand them now and base our choices on having all the relevant information to make an informed decision now.


Gerard

www.prsa.ie

 

[CharlieMac]

there's nothing to stop you setting up two separate PRSA AVCs with different policy numbers.

I thought of that but if I did it that way would I forgo the compounding effect of having all my money in one fund?

E.g: 50k in one pot and 50k in a separate pot (policy) won't compound together as well as 100k under one policy? There might be other provider charges I would have to double up on too?

 

[GSheehy]

I think you are agonizing endlessly over a problem that does not exist. On the plus side, is that delaying the day of decision? And commitment!

Plural

 

[CharlieMac]

It's a problem for me and I'm trying to educate myself as best I can. I'm very grateful for all the help I've received on this excellent website.

If anyone could confirm my last comment above, am I right or wrong there, I would really appreciate it.

Cheers.

 

[ClubMan]

I thought of that but if I did it that way would I forgo the compounding effect of having all my money in one fund?

E.g: 50k in one pot and 50k in a separate pot (policy) won't compound together as well as 100k under one policy? There might be other provider charges I would have to double up on too?

How/why do you think that two separate policies would be worse than one in these respects? The compounding results will surely be the same overall and unless there is some fixed cost to setting up a policy then the charges should also be equivalent? If you don't agree then outline a simple scenario where you think that there's a disadvantage to having two policies maybe?

 

[LDFerguson]

E.g: 50k in one pot and 50k in a separate pot (policy) won't compound together as well as 100k under one policy?

If all things are equal - fund growth, charges - on an AVC PRSA, then it makes no difference at all to the rate of compounding and growth whether you have two at €50,000 each or one at €100,000.

There might be other provider charges I would have to double up on too?

Under law, an AVC PRSA can only impose charges as a percentage of the fund and/or a percentage of the contribution. Fixed charges are not permitted. There are no such restrictions on an AVC that is not an AVC PRSA. So in theory an AVC might have a fixed charge per policy, e.g. a monthly flat policy fee of €5 or something like that. If that was the case, then you'd be paying extra charges by having two. But not with an AVC PRSA.

Make sure that the charges for two €50,000 AVC PRSAs are identical to one at €100,000. There's a huge variety of charges available on PRSAs.

 

[CharlieMac]

@LDFerguson thank you, that's just what I was looking for.
@ClubMan I thought I was OK with numbers but I guess not. Working with one pot I can visualise the idea of compounded fund growth: maximised by uninterrupted accumulation of contributions added to the ongoing growth from all those contributions combined. But it feels counter-intuitive to me that, even with all things being equal, you get the same effect by splitting the fund in two. I suppose working in reverse: 1 + 1 cannot be less than 2. I made a spreadsheet to confirm!

 

[ClubMan]

I thought I was OK with numbers but I guess not. Working with one pot I can visualise the idea of compounded fund growth: maximised by uninterrupted accumulation of contributions added to the ongoing growth from all those contributions combined. But it feels counter-intuitive to me that, even with all things being equal, you get the same effect by splitting the fund in two. I suppose working in reverse: 1 + 1 cannot be less than 2. I made a spreadsheet to confirm!

I don't really understand any of that but, as @LDFerguson has also said, the effects of compounding are no different with one or two policies (all other things being equal).