Pension options PRSA or PRB

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cremeegg

Registered User
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At 58 I have a pension pot of E120k that I need to move from a SSAS.

Full picture. I hope that both my wife and I will have a contributory state pension, that I will have a small public service pension (13 years service low wages), I hope to have a full UK state pension and I have a residential investment property.

A month ago my broker was advising that I put the money in a PRB now he is recommending a PRSA from Aviva, as follows

The range of funds in a PRSA is not as wide as a Buy Out Bond, this is a minor inconvenience when you consider the ease of opening and retiring the PRSA. Also, with these new range of PRSA’s I was able to select one with an Annual Management Charge (AMC) of 1% compared to 1.25% on the Buy Out Bond. You still get 100% allocation.​

I have no idea how much my broker is getting paid for this or on an on-going basis.

Despite fancying myself as financially well informed, I am all at sea. Any advice welcome.
 
cremeegg said:
A month ago my broker was advising that I put the money in a PRB now he is recommending a PRSA from Aviva, as follows
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What kind of broker is this?
Tied agent?
Execution only?
Advisory?
How did you choose them?
cremeegg said:
Annual Management Charge (AMC) of 1% compared to 1.25% on the Buy Out Bond. You still get 100% allocation.​
Click to expand...
1% is not cheap in my opinion/experience.
cremeegg said:
I have no idea how much my broker is getting paid for this or on an on-going basis.
Click to expand...
Ask them?

Check out existing threads on suggestions for where to put pension money.
 
I have never seen ease of opening a prsa etc used for suitability. Sounds like the new prsa will pay more commission than the prb.

Take a step back. Both structures do the same thing really. Ask yourself the following.

What is the goal for the pension? Prsa have a later retirement date than prbs which can be useful. You can also split them up etc.
Do you want to contribute to it?
What investment strategy do you want to implement?

Then pick the product that can do all 3?

After that pick the provider that can implement the above and provide a good service in the most cost efficient manner?

Be aware of all costs from the outset. ask for a total expense ratio and if there is exit penalties too. Exit penalties are a result of commission payments.

A fee of 1%, if it’s includes broker fee for on going advice, is fine imo. Brokers have to be paid for their service. If you don’t need their advice go down the execution only route.

Ask the broker why aviva? The last time I checked Aviva’s performance hasn’t been the best so why is he choosing them. Also from past experience avivas customer service is shocking.

Good luck
 
At 1% annual charge on an Aviva PRSA the commission is probably >€4,000. Aviva have lower-charging options available, as do other PRSA providers.

Like @Oisin19 I wouldn't agree that "ease of opening and retiring" a PRSA is a valid reason for choosing one. There's a small amount of additional information about your previous employment - salary and service - required with the Buy-Out Bond. But that's pretty much it. It's very possibly information you have readily available anyway.

I'd be inclined to shop around.
 
There were PRBs available with pricing of 1% ( or less ) with 100% allocation prior to the launch of the new PRSA.

Honestly, the launch of that product during the week was more about this is how much commission you can make as opposed to the benefits to the customer.

I'd still wait until all providers show their hands on their pricing of new products and the market settles.

Gerard

www.prsa.ie
 
I am less knowledgeable than most on this. Is a PRB the same as a buy out bond ? What TER is reasonable ?
Why is the market settling right now ?
What is the retirement age on a PRB ?
 
PRB is same as Buy Out Bond.

You can readily (I mean the AMC is stated on the website) buy a 100% allocation, 0.75% AMC, with no exit charges PRB but that's on an execution only basis.

If you want/need advice you generally pay more. The current average advice product AMC is 1.20%/1.25%

The TER will depend on the fund/s selected as you'd just add the Other Ongoing Costs for each particular fund to the AMC quoted.

It's likely that the PRSA will replace all Personal Pensions, Executive Pensions, PRBs/BOBs and ARFs in the next few years so PRSA pricing is changing. You'll still be able to hold the old contracts but you won't be able to buy new ones.

The retirement age on a PRB should be the same as the normal retirement age on the original scheme that the money was transferred from but they can be 'matured' from age 50.

Gerard

www.prsa.ie
 
A vested PRSA is one where up to 25% TFC has been withdrawn and the residual funds remain in the PRSA which then operates as an ARF (although it is in a PRSA product). This remaining pot can stay in the vested PRSA until age 75, after which time, if not withdrawn / transferred to an ARF it becomes locked and no further withdrawals are allowed.

Salary & service will need to be considered in this situation. The PRB will leave both options of TFC available i.e salary and service with annuity or 25% and ARF/taxable route. You only get the latter with a PRSA. If the advisor/ broker has not discussed this with the OP i cannot see how the PRSA can be the recommended product. PRBs have a wonderful feature where you can split / ring fence the TFC element at outset, so you get two PRBs. One for the ringfenced TFC amount and the second plan for the balance must buy the annuity at retirement. If say the salary & service calc comes out at €50k now you put that in a ringfenced plan and regardless of what it grows to at drawdown its all paid as TFC.

Also it is possible to alter the NRA of a PRB. At outset the plan must main the NRA of the scheme from which it originated from however once set up the NRA can be altered by the PRB holder.

The main items that the OP needs to consider as I see it are:
1: the splitting feature of the PRSA - staggered drawdown with multiple plans.
2: lockdown of PRSA at 75 - can’t stay PRSA for ever
3: splitting feature of the PRB. What does TFC look like under the salary and service option and can this be further maximised by a split PRB
4: When do you plan to drawdown and do you need it all in one go.
5: Pricing - you would get a PRSA and a PRB at 100% alloc and 0.75% amc. Someone needs to get paid for the work done so for that you will pay more. You’d like to have seen more of the technical stuff covered off in the SOS, hopefully its in there somewhere. For me pricing is of lesser importance. You could loose valuable options at drawdown by not considering both routes carefully now.
 
Thanks for all the replies, lots of food for thought.

The broker has now provided more detail on their advice as follows


Is this a good option.

Or what questions should I be asking my broker.

Again, thanks in advance for any suggestions.

 
I’d query what “net” allocation means. Implies that there is a gross allocation. Maybe one of the brokers are familiar with aviva’s terms?
 
It annoys me when advisors don't disclose what they are getting paid and you have to go hunt for it in the tons of documents that are sent to you. Having a quick look at the contracts, it looks like they are getting 2% initial commission and 0.25% ongoing. Why they feel the need to hide the fact that they are getting paid, is beyond me.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
I agree Ger. It certainly won't be a case of jumping on the first bandwagon that comes by...or going with the cheapest product out there. For instance, Standard Life are the only provider out there that has an S&P 500 index for regular premium contracts. All other providers have North American equity indexes, some of which have just 30 stocks in them. Other index funds on the market have massive tracking errors that will result in a significant loss to investors over the long term.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
When you say some 'index funds ...have massive tracking errors...' is this Irish Life that you referenced in this context previously?

I have a PRB with Irish Life invested 100% in their Irish Life- Indexed World Equity Fund.
 
Thanks Steven for pointing this out. I can understand why the broker is paid for setting up the PRSA but given the objective is to let the investment sit untouched for 15 years why should they expect an ongoing fee.
 
Another fact that's generally overlooked in the PRSA Vs other pension products debate is the treatment of other ongoing fund costs (OOCs, CIVs or whatever each product provider calls them).

There are certain third party fund costs that the provider cannot pass on to a PRSA client that can be passed on to (say) a PRB client.

The problem with these OOCs/CIVs is that there's no obligation on the product provider to tell you what they are - some do, some don't. And that probably extends to the intermediary as well. In addition, I'm not sure all providers make the distinction by providing OOCs/CIVs for product classses.

That said, it is improving and at the end of the day these costs & others have to be included in the fund prices/performance figures that all product providers publish. But, it's a question that should be asked at point of sale.

An example of this would be (say) Prisma 4 Fund with Zurich Life - it's made up of equities, bonds, alternatives, property, cash. The OOC for a PRB is (currently) 0.07% and for a PRSA it's 0.02%.

I can't see the difference in costs by product for the Merrion Fund above. I can only see one fact sheet and the CIV is 0.18%.

So, technically, a higher AMC on one product may not translate to a higher TER (AMC + CIV/OOC). You don't know the full cost until you find out what the CIVs/OOCs are.


Gerard

www.prsa.ie
 
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cremeegg said:
Thanks Steven for pointing this out. I can understand why the broker is paid for setting up the PRSA but given the objective is to let the investment sit untouched for 15 years why should they expect an ongoing fee.
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Ongoing service. And as your advisor, they have bills that have to be paid to keep the business running. They can either meet this cost by charging you the highest possible commission up front or a lower up front and an ongoing. The total amc shouldn't be higher. Some advisors charge high up fronts and an ongoing. That just ends up being very expensive for you...
 
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