New to AVCs

D

Derek1001

Registered User
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12
Hi there,
I recently paid for a consultation with independent pension advisors and they recommended that I should start an AVC. I am 47, in the public sector and I have never had an AVC. They recommended a Zurich Prisma 3 fund - does this sound like a good fund? Has anyone any thoughts on this?

I am a post 2004 teacher and my retirement age is meant to be 65, but I plan on leaving early.
Also, the company I was speaking to will set this up for me, but of course I will pay a few for this this - if Prisma 3 is a good option would I just be better to go to an online company like Labrokers and pay less in charges? Thank you for taking the time to read this message - I've just been a bit baffled, but I know I need to take action on my pension front.
 
What specific reasons did they give you for deciding that this specific fund was most appropriate for your needs?
 
The principle of AVCs is great from a tax payer's perspective. Especially if you are paying income tax at 40%. Ideally you would have started these years ago but it's never too late.

These are my suggestions:

If you start in 2025 you can backdate contributions to the 2024 tax year (for tax relief purposes) but that's as far back as you can go now.

Familiarize yourself with the maximum amount you can pay subject to tax relief for your age and if you are paying the maximum permitted, consider raising the contribution levels as you age. Next change is the tax year that you hit age 50.

Check in on how your investment is doing from time to time. It can serve as an encouragement to continue investing in a more comfortable retirement. Beware the temptation to switch investment strategy when the values dip.

Certainly use a professional advisor but choose whether you want the full advice or just execution only. The first option is more expensive but might be best if you feel you are entering the unknown. The second option is where you are comfortable selecting your own provider and funds. The charges that can apply (to both) include up front commission, on-going commission (aka trail commission), an agreed fee, etc. Charges may vary from advisor to advisor so do what some people do and get a few proposals from different brokers. Tell the brokers of this intention.

From the product provider, management charges are a key focus for you too. They can be negotiable and what might sound like a low amount eg 1% pa can take a significant chunk from your pot over the term.

Regarding your specific Zurich Prisma 3 question it's difficult for anyone to answer that without knowing your full circumstances and attitude to risk. From what I've read on here Zurich is a well respected Pension and Investments supplier in Ireland (I have personal pension business with Zurich and I'm satisfied) and the Prisma range of funds seem popular. Any fund rated 3 is generally considered a cautious investment strategy, less potential for growth in good times, more protection for your money in bad.
 
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If you have decided what fund you want to invest your AVCs into you will get the best deal if you open your AVC product through an execution only broker.

I was in a position similar to you 22 years ago.
I had the future security of a reasonable Public Sector pension for life. Because of this I decided to invest my AVCs into a higher risk level (equivalent to prisma 6) on the basis that I did not need the extra pension gained from the AVCs to provide for basic living essentials. On this basis I was happy to take on extra risk for extra reward.

Prisma 3 seems a little too much on the playing it safe side.
The risk level can be changed at any time during the investing period into your AVCs. Future payments can be adjusted to a higher or lower risk level and the existing funds can also be changed to a higher or lower risk level without incurring any extra fees.

I don't know anything about your financial position, but you might be better off going higher than Prisma 3.
 
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if you're a bit baffled then why would you go the execution only route?

You may not be baffled in a few years time, when you learn more and are more confident with your choices, so maybe consider it then.

Way too many people using advisors for consultations and then rolling up to buy the recommendation on an execution only basis not fully understanding what or why they're buying. Maybe they're just looking for short-cuts at the lowest cost possible. Case in point would be the fixation with Non-Standard PRSA recommendations when Standard would do.

Do all the research yourself (here or elsewhere) and then make an informed decision on the basis of the conclusions you've arrived at.
 
GSheehy said:
Case in point would be the fixation with Non-Standard PRSA recommendations when Standard would do.
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Where is there evidence of such a fixation here on Askaboutmoney? Or maybe you mean a fixation on avoiding high charges of up to 5% on each contribution and 1% AMC?
 
I’m somewhat baffled as to why they would recommend such a conservative option? As @S class pointed out, you’ll have the security of a lifetime, inflation-adjusted income so not only can you afford the higher risk, but you may even require the higher risk/reward if you wish to retire early.
 
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GSheehy said:
if you're a bit baffled then why would you go the execution only route?

You may not be baffled in a few years time, when you learn more and are more confident with your choices, so maybe consider it then.

Way too many people using advisors for consultations and then rolling up to buy the recommendation on an execution only basis not fully understanding what or why they're buying. Maybe they're just looking for short-cuts at the lowest cost possible. Case in point would be the fixation with Non-Standard PRSA recommendations when Standard would do.

Do all the research yourself (here or elsewhere) and then make an informed decision on the basis of the conclusions you've arrived at.
Click to expand...
Gerard makes good points here about knowledge - Educate yourself. I've been in the financial services industry for most of my career but I've learnt more here about retirement planning in the last two years, than in the last 20!

For example, unless there is something unusual about teacher jobs and their pensions, I'm a bit surprised that you ended up paying to be informed that AVCs were a good option for you.

While paying AVCs is not pensions rule 101, its not far after!
 
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conor_mc said:
I’m somewhat baffled as to why they would recommend such a conservative option? As @Kev1964 pointed out, you’ll have the security of a lifetime, inflation-adjusted income so not only can you afford the higher risk, but you may even require the higher risk/reward if you wish to retire early.
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Thanks for the credit but I think it belongs to S Class! :)
 
@Derek1001
I recommend reading though the excellent Single Pension Scheme thread. Even if you are not in that Pension Scheme there is a lot of great explanation about AVCs in there and the post by @gort_gráinneog has a calculator where it shows how much it will cost you to get max tax relief on making AVCs.... how much you would pay and how much would actually go in to your AVC fund.
 
ClubMan said:
What specific reasons did they give you for deciding that this specific fund was most appropriate for your need
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They didn't give a particular reason. I guess I probably came across as a cautious investor. They first showed me the performance of cash funds where it seems that over the last 10 years, the fund has been losing value (with last year being an exception). They would seem to have been losing on average 0.6% approx. I guess part of the recommendation stems from the fact that I started the meeting saying that I would prefer to retire at 55 if possible (I just wanted to get a sense of what this would look like, but I probably am happy enough to keep going for a while after that). If, as I stated, I was 8 years out from retirement perhaps the advisor felt that Prisma 3 was a safer place rather than riskier options which had greater potential for growth in the long-term.
 
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Derek1001 said:
I am a post 2004 teacher and my retirement age is meant to be 65, but I plan on leaving early.
Click to expand...

AFAIK, the only way to retire pre 65, AND receive the PS pension at that point, is to apply for CNER.

I presume that is what you plan to do.

Will the AVC benefits be available at that point, pre-65?
 
Protocol said:
AFAIK, the only way to retire pre 65, AND receive the PS pension at that point, is to apply for CNER.

I presume that is what you plan to do.

Will the AVC benefits be available at that point, pre-65?
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The AVC benefits are linked to the main scheme benefits. If he takes CNER (at any time from 55) the AVC benefits are then available.
 
Protocol said:
AFAIK, the only way to retire pre 65, AND receive the PS pension at that point, is to apply for CNER.

I presume that is what you plan to do.

Will the AVC benefits be available at that point, pre-65?
Click to expand...
Yes, I would be planning on CNER
Kev1964 said:
The principle of AVCs is great from a tax payer's perspective. Especially if you are paying income tax at 40%. Ideally you would have started these years ago but it's never too late.

These are my suggestions:

If you start in 2025 you can backdate contributions to the 2024 tax year (for tax relief purposes) but that's as far back as you can go now.

Familiarize yourself with the maximum amount you can pay subject to tax relief for your age and if you are paying the maximum permitted, consider raising the contribution levels as you age. Next change is the tax year that you hit age 50.

Check in on how your investment is doing from time to time. It can serve as an encouragement to continue investing in a more comfortable retirement. Beware the temptation to switch investment strategy when the values dip.

Certainly use a professional advisor but choose whether you want the full advice or just execution only. The first option is more expensive but might be best if you feel you are entering the unknown. The second option is where you are comfortable selecting your own provider and funds. The charges that can apply (to both) include up front commission, on-going commission (aka trail commission), an agreed fee, etc. Charges may vary from advisor to advisor so do what some people do and get a few proposals from different brokers. Tell the brokers of this intention.

From the product provider, management charges are a key focus for you too. They can be negotiable and what might sound like a low amount eg 1% pa can take a significant chunk from your pot over the term.

Regarding your specific Zurich Prisma 3 question it's difficult for anyone to answer that without knowing your full circumstances and attitude to risk. From what I've read on here Zurich is a well respected Pension and Investments supplier in Ireland (I have personal pension business with Zurich and I'm satisfied) and the Prisma range of funds seem popular. Any fund rated 3 is generally considered a cautious investment strategy, less potential for growth in good times, more protection for your money in bad.
Click to expand...
Thank you for such a detailed response. Lots of good points there I wouldn't have considered
 
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