PENSION CONTRIBUTIONS ARE A WASTE

Re: avc rip off

Standard prsa only way to go!

Click to expand...

Hi Skint - The standard PRSA charges are quite high (5% entry fees if I recall correctly). You can get better value pension investments from Quinn Life or some of the nil-commission brokers.

A lot of whinging going on here......

.... show me a superior mathematical model for saving for retirement.

All this ranting about jail and robbery? Can you show you were misled? Did you (or the trustees) not enquire about charges? If you are being "ripped off" are you (or the trustees) powerless to do anything about it?

"Standard prsa only way to go!"
Why? I have approx 50 clients with standard PRSAs but they are not the "only way to go" across the board.

Re: A lot of whinging going on here......

Hi Alan,

Brokers disclose the charges in occupational schemes as bald percentages, which are meaningless.

For example the scheme to which I belong has a 97% allocation rate, 5% bid-offer spread and something like a €3 flat monthly charge. The annual management charge is 0.75%.

Is that good or bad? Because it's an occupational scheme, as opposed to a personal pension or PRSA, the broker doesn't have to quantify the effect of these charges on my pension. Neither does he have to disclose the reduction in yield.

I suspect we are being ripped off but I don't know by how much.

avc rip off

> The standard PRSA charges are quite high (5% entry fees if I recall correctly). You can get better value pension investments from Quinn Life or some of the nil-commission brokers.

Standard PRSA charges are CAPPED at 5% of each contribution and 1% annual management charge. However it is possible to reduce this 5%/1% to 0%/1% in some cases by arranging the PRSA through a broker on a fixed fee (usually c. €100-€200) basis. It may also be possible to get a non PRSA personal pension plan with comparable charges. Charges are very important but don't lose sight of the other important criteria (e.g. advice - if required, selection of funds, flexibility etc.).

> Did you (or the trustees) not enquire about charges? If you are being "ripped off" are you (or the trustees) powerless to do anything about it?

Have to agree. More heat than light in a lot of the ranting above. In many cases people are "ripped off" because they don't bother to read the small print explaining the charges that apply. People who can't/won't do this for themselves should pay an INDEPENDENT advisor to do it for them rather than depending on the information provided by a salesperson or somebody else with a vested interest in selling the pension to them. Genuine cases of misselling should be pursued (e.g. with IFSRA) but blaming intermediaries for high charges which have bee explicitly agreed to or for poor market performance (which is under nobody's control) gets us nowhere.

I don't work in the industry by the way...

> Is that good or bad? Because it's an occupational scheme, as opposed to a personal pension or PRSA, the broker doesn't have to quantify the effect of these charges on my pension. Neither does he have to disclose the reduction in yield.

I thought that the whole purpose of the IIF or IFSRA or whatever compliant projections (with assumed growth rates of 6% or whatever) were to allow comparison of different pensions on a like for like basis in terms of charges? Or are you saying that these illustrations are not provided for occupational schemes (I thought that I received something like that when I was the member of various occupational schemes in the past)?

Meaningless?

Hi Moneybags,

You are in an occupational pension scheme so the responsibility for the investment vehicle used lies with the trustees. You are telling me that you are not sure if they have done their homework or not because you are not assured that you are getting a good deal. Take up with the trustees.

I can't tell you whether this is a good deal or not without knowing the structure and requirements of your company.

However you do know the exact charges so it's hardly meaningless.

Re: avc rip off

Occupational schemes still don't have the same disclosure rules as standalone pensions. When I joined I got a projection of expected benefits, the same as you'd get with a personal pension.

But the projection was based on 9% annual growth, when the IIF projection rate was either 6%-8%. ASAIK the broker was entit;ed to project using whatever rate he thought appropriate.

The effect of charges was not disclosed in the projection and no reduction in yield was provided. AFAIK there's no requirement to make these disclosures.

I've developed a good working relationship with the broker over the years and I've no reason to assume he's pulling the wool over my eyes. He's given me everything I'm entitled to know. The trouble is when I add it all up I don't know where I stand.

Re: avc rip off

Hi Alan,

The scheme offers a wide range of investment alternatioves, so I've no quibble with that. It's up to me to choose the one that suits me best. Based on what I've learned on AAM I've chosen the lowest charging equity fund on offer on the basis that, with 25 years to go to retirement, I can afford the risk involved.

I work for a private company and all the trustees are shareholders. They have a "take it or leave it" attitude to the pension and, given the balance of power within the company, this is something that employees have not been willing to challenge.

I have considered putting myself forward as an employee trustee but have been advised against it. Many older members of the scheme have overblown expectations about their pensions and this is sure to turn ugly when the penny eventually drops. I wouldn't want to be a trustee when that happens.

We're gone.....

..... a little off topic as I really wanted someone to demonstrate a better way of saving for retirement than a pension arrangement. The original accusation was that pension contributions are a waste.

Moneybags, unfortunately, it would appear that the employees have a communications difficulty with the trustees. That isn't going to be solved on AAM and will be difficult to resolve without member representation.

Re: We're gone.....

Hi Alan,

Point taken. However the original topic also referred to hidden charges. I'm saying it's not good enough to disclose charges as bald percentages. The disclosure is only meaningful when expressed in pounds, shillings and pence (or even euro and cents).

Because of the tax breaks, there is no alternative to the conventional pension. But the tax breaks shouldn't be used as a smoke screen for rip off charges and commissions.

Re: We're gone.....

Totally agree with your last post. Does anybody know of a reduction in yield calculator (or something similar) into which you can punch the various charges (e.g. up front, per contribution, annual management charge etc.) and get a figure that can be compared on a like with like basis? Ideally this information should be provided up front but if it's not (at least for some or all occupational schemes) then is there any other easy way to get it?

Perhaps a complaint to the Pensions Board or IFSRA on the alleged lack of transparency on occupational scheme charging structures is merited?

Re: We're gone.....

Hi
I heard before that the only way to get a picture of the actual charges and commissions of a pension is to do the following

When the broker gives you projection figures for the pension they normally don't apply charges on these figures.

What you need to do is tell the borker you want to see the same projections (ie same growth rate etc) however with all the charges and commissions applied.

When you get this you can actually start comparing the figures and then you get an idea of how much the pension is going to cost you.

Note also when dealing with a broker you have to use the word 'commission' instead of charges in order to find out how much he is charging.

Re: We're gone.....

> When the broker gives you projection figures for the pension they normally don't apply charges on these figures.

Are you sure about that? Other than the point raised by MoneyBags above about the alleged lack of transparency on occupational pension scheme charges I thought that all other (e.g. PRSA, personal pension, AVC etc.) illustrations were goverened by (IFSRA or IIF?) rules that govern detailed disclosure of charges and inclusion of the effects of these in any projections provided? I don't know the letter of the law on this stuff though...

Was the original topic about

... about hidden charges. You know what the charges are on your scheme. You do have the ability to work out in pounds shillings and pence.

I personally would rather know the charges than the reduction in yield. Why? The RIY figure assumes you'll work in the same company and stay in the same pension scheme on the same charging structure until normal retirement date.
Now, Some schemes offer bonuses at maturity or lower management charges after say 10 years. In todays mobile workforce these bonuses/reductions may not be relevant to me.

P.S I would not expect you to find a reduction in yield calculator anywhere due to the multitude of pension charging structures that there are.

Re: We're gone.....

Hi ,

I got projected figures this year for my occupational pension scheme.
In very small print at bottom of page its says:
'Note charges are not applied to above amounts"

In all the projected figures I got over the years, it always said that at the bottom of the page for this occupational scheme .

Note I'm talking about an occupational scheme here.

PRSA's etc are a different ballgame altogether. In all PRSA statements/projections they are very upfront about the charges.

Re: PENSION CONTRIBUTIONS ARE A WASTE. the alternative

No way are pension avc's a waste of time since Ch McCreevy changed the rules a couple of years ago. Up to then, they were a waste of time and only provided expensive insurance (they did not create wealth). Now pension scheme allow you to create wealth very tax effectively. As a person nearing retirement, I am looking forward to setting up ARF and controlling investment myself. Pension money is the last money to be spent because it is growing tax free in the meantime. If it is not spent in my lifetime it is inherited at a very benighn tax rate (23%??) and does not add to childrens gift tax threshold.
More and more people are setting up Self administered Pension funds (and the rules are becoming increasingly easier to do so) - this must be a threat to all the over paid fund managers.

retiring at 45

Pensions are a waste of time , giving your hard earned money to someone else to play with in the name of professional investor , gamblers more like.

Not one sucker above has had the notion of investing in property , thats my pension , sell off one at a time i have a good deal of property which i will enjoy later in life, making money is easy and nothing has returned anything like bricks and mortar.

Re: retiring at 45

Isn't hindsight great?

Pension Contributions are a waste of time

If one's fund manager is performing so badly and his fees are so heavy, is it possible to switch one's fund to an alternative fund manager who has a better performance record and lower charges?

Over five years I have invested €25,000 (including tax relief) into my fund. It is now worth less than €24,000. Yes, I have gained the tax relief, but I am still disappointed with the results. Are the prospects better for the future?

Pension

I had a recent shock when an actuarial valuation was done on my company pension on exiting the company (defined benefit scheme)

If I wanted to move my pension to a.n.other scheme I am told it will be only worth approx 40% of what it should be due to 9/11, the weather, or any other excuse! but what leaps out of the page is "underfunding by the employer".

Obviously I would be insane to move a currently underfunded pension. How long do I have to decide if I move my pension or not and what can be done apart from trustee pressure on the company to bring the pension into line. Apparently according to the pension board a company scheme can continue to be underfunded as long as there is a enough money in the scheme to fund current pension recipients and an actuarial statement to the pension board shows that the pension is afloat.

That basically buggers a person like me that wants to move out of the scheme and locks me into it even tho' I am disallowed from contributing to it as I have left the employer.

Yikes!!!