Occupational pension v PRSA AVCs?

What funds are available and what funds are you investing in?

There's €6k pa committed to the occupational scheme (Irish Life high Index / Consensus funds) and approx another €15k+ pa in AVCs. Possible options under standard AVC PRSAs (to be decided), New Ireland, Zurich (100% allocation / 1% management charge)?

Are there only 2 funds available under the group scheme?

What is your attitude to risk?

There's a lot more to it than simply saying one or the other.

In the most basic format, going the PRSA AVC gives you more control over the fund choice but is more expensive.

Can you build a diversified portfolio within the group scheme format is another matter. If you can, use that.

Then you have to ask has the advisor of the scheme discussed investment strategy or do they try to get everyone to go the default Consensus route?


Steven
www.bluewaterfp.ie

Thanks for the advise. The group scheme has 10 funds available, they tend to automatically suggest the consensus/default route unless prodded. I'd be risk tolerant, say 70-80% aggressive/higher risk (15 years to retirement).

I’ll seek a meeting with the group scheme advisor to discuss investment strategy. However my concern is that even with a suitably diversified scheme it's still "all Irish Life" and my gut-feeling is that I should spread the risk a bit and have a couple of other (suitably diversified/aggressive) PRSA AVC schemes on the go with the likes of Zurich / New Ireland (albeit at .25% extra management charges).

There should be enough in the 10 funds for you to have a diversified portfolio. When I advise on diversified portfolios, I don't use funds like the Consensus which has a mix. Each fund specifically only holds one type of asset or region e.g. American equity, European equity or bonds.

Using a different fund manager will not provide you with any diversification, they all largely invest in the same stocks.

And remember, just because you are risk tolerant doesn't mean you have to invest in equities. Take this example, one investment returns 10% per annum for 10 years. The other returns 20% for 7 years and falls by 20% for the other 3 (the sequence of the falls is irrelevant). Investment one will outperform investment 2 by 41% over the 10 year period.


Steven
www.bluewaterfp.ie

Thanks for that. The occupational fund options, include; consensus, cash/lifestyle, 4 indexed equity funds (World/Irish/European/High Yield), 2 property funds (Irish/Global) and 1 indexed long bond fund. I assume that is sufficient choice for a diversified portfolio?

Finally (to be contrary) assuming I achieve sufficient diversification is it worth the additional .25% management charge to have access to ‘other fund managers’ (with other providers) who may have a different investment strategy to Irish Life fund managers or do you regard them all as essentially the same?

I'd be careful about Long Bonds. Interest rates will go up in the near future and long bonds will be hit harder than short term bonds. Is the Global property fund a REIT fund (I don't use Irish Life very often). I think the High Yield fund has an additional management charge on it to.

You could probably put something together from those funds based on your investment strategy.

Most fund managers follow the same. There are arguments over whether to buy an index or active manager. Active managers have the scope to make short term gains but in the long run, I believe the market is efficient and so an index will suffice for investing. It is not worth paying an extra 0.25% for an index. I would look at the bond fund element though. I wouldn't invest in long bonds.

Steven
www.bluewaterfp.ie

Thanks for the advice, I can check out the Global Property fund and let you know. Do you have a general rule of thumb re % invested in; property / equities / bonds / cash / mixed consensus fund?

Also from an earlier post, what was your take on the Consensus fund? Would you avoid it due to being a mixed/passive type fund in preference for a more aggressive equity-based index or specific asset/region?

I go through a process in assessing a clients needs and attitude to risk. We then identify any conflicts and come to a solution. The process I use is very client specific, so I don't really have a rule of thumb that I can give you.

If the scheme advisor is any good, he should have no problems in helping you out.


Steven
www.bluewaterfp.ie

I'll ceratinly follow up with him. Thanks for all your help and advice Steven, much appreciated.

Your welcome