Pensions: PRSA Standard, non standard or personal

[Fideroiste]

Hi guys,
I am a bit confused about what is the best option for me for getting a pension. I have done a fair bit of reading around e.g. consumer advisers publications and pensions board literature etc. They seem to be advicing that standard prsa's were the way to go. They didn't seem to say much about non standard only that the charges are not fixed and an extra fund is available to invest in (what type of extra fund is it anyway). It looks like there isn't much of a difference between standard & non standard otherwises.
I was in with a multi agency advisor the last day and what I tuck from the meeting was that standard pensions were micky mouse and that non standard or personal pensions were the ones that had the least charges and best value. Can anybody help me out?
I am in my early 20's.

F.

 

[ClubMan]

They seem to be advicing that standard prsa's were the way to go.

It depends. One key issue with pensions is charges although others (e.g. fund selection, customer service etc.) are also important. Standard PRSA charges are capped at 1% annual management fee and 5% on each contribution. Many Standard PRSAs will charge these maximum fees. However some (especially those set up on a free or fixed fee paying basis with a discount execution only broker) may be lower. However some personal pension plans/Retirement Annuity Contracts (RACs) may have even lower charges. Non Standard PRSAs don't have any cap on charges and those that exist may well charge more than 5%/1%. You would want to have a very good reason for paying above these limits though. You really need to shop around and get advice from a suitable qualified and authorised financial intermediary (authorised advisor or a good multi-agency intermediary but not a tied agent) if necessary. Don't assume that you will only ever have a single pension/fund in your working life. This is not necessarily the case. I myself have five (I think) different plans (one regular contribution RAC that is paid up, one lump sum RAC, two PRSAs - one paid up, one active, a paid up occupational fund - there may be others...!) which I did not or cannot merge into one! It means that there's a bit of administrative hassle but since the charges on all of them are reasonable and having them separate might be seen as spreading the risk I live with this. My point is that it's not like this is a once off decision that you must get correct now. Obviously you should look for a pension plan that suits your needs (e.g. offers the sort of funds that you want) and has competitive charges but it's not like if you don't get the ideal one now that all is lost.

I was in with a multi agency advisor the last day and what I tuck from the meeting was that standard pensions were micky mouse and that non standard or personal pensions were the ones that had the least charges and best value. Can anybody help me out?

This sounds like very dodgy advice from somebody trying to flog you a pension with higher charges for his/her own benefit. Can you clarify exactly what they said in this context? It sounds like rubbish to me.

 

[Fideroiste]

Hi Clubman,
Thanks for your quickly reply. I had been in a week before meeting this person where my details wee taken (to get me quotes for a Standard and ethical pension). On the day that I went back to get the quotes, this person talked through the PRSA first then when the ethical pension was mentioned (this seems to be a non standard) this person said that the standard's PRSA exists to encourage people in supermakets (and similar low paided jobs) to get pensions and that non standard & personal are the types to take out (there might of been a mention of that person having one of these).
I understand that pensions are a bit of a rip off e.g. min of 95% of allocation invested - 1% annual of lump - rate of inflation (3% at the moment), leaving only a 92% & less actually being invested (I would prefer to pay up front rather than letting the % slipping away from my pension in charges) but the tax incentive seems to be the only short term benefit.
I think it is an important decision as it will be my biggest commitment yet (don't have a mortgage, etc) so my logic is that if I make a bad move it will cost me but if I make a calculated move at least I have tried me best.
Maybe I need to exclusively deal with authorised advisors cause I thing I read that they are supposed to be truly independent and shop the whole of it.
What are multi agencies quoting me when I go for a quotation if they are not totally independent?
P.S. I don't mean any offence if you are a pensions/ financial person its more the system that I am not happy with.

Míle Buíochas arís,
F.

 

[Marianne]

The advice you got was very suspect.

Pension fund choice and pension product charges are two totally separate issues. Trying to suggest that Standard PRSAs are only suitable for lower-paid workers is hogwash.

Standard PRSAs offer you capped charges of 5% per contribution and 1% annually on the accumulated fund. Check to see that the so-called advisor is offering you a charging structure of this or lower. I'd guess he or she is trying to steer you into something that has higher charges, for the benefit of him or her only.

The argument that higher charges are worthwhile because of a wider range of funds is bovine droppings. Just because a fund has outperformed it's competitors in the past is no reason to believe that it will do so in the future.

Get your "advisor" to put in writing why he or she is recommending a particular product above others including Standard PRSAs. If he or she is reluctant to put their recommendation in writing, you've got to ask yourself why...

 

[markowitzman]

I would change advisor. As you say pension is critical to your future. I sense a lack of trust on your part (rightfuly so). At this juncture better to part company (sadly taking from experience having been missold a pension by boi in Uk).

 

[darag]

Fideroiste, I'd run away from any advisor who made such a claim (that non-Standard PRSAs were for supermarket workers??? - that's so offensive on so many levels, I wouldn't know where to start). As you probably know your advisor is in reality a type of salesperson wo earns commision from the product they sell you. Somewhat unrealistically, they are still supposed to have your interests to the fore. In this case, it sounds very much like the person is trying to steer you towards a pension which earns them the most commission. I got stung badly myself a few years ago when I first organised a pension. My advice would be to take it very slowly and read as much as you can about the area before signing up for anything. It may be just me but I prefer (even enjoy) learning about and organising these things myself. If you are comfortable with that approach, read SPC100's thread about organising a low cost pension through an execution-only broker. He managed to get an allocation rate of 100% (101% in the first year) and low annual management charges which is effectively the product at cost.

 

[Humpback]

I think it is an important decision as it will be my biggest commitment yet (don't have a mortgage, etc) so my logic is that if I make a bad move it will cost me but if I make a calculated move at least I have tried me best.

Most definitely the pension is important. Best advice I got leaving home for first job was to sort out pension straight away. Looking at the invesments even now, only 5 years down the road, it's been advice well taken.

Unlike the recruitment consultant I was dealing with recently. I had a job offer from a company, and was concerned over a 4% pension contribution as part of the offer, and this was a sticking point for me.

Recruitment consultant couldn't understand this and said, direct quote "Why would you be bothered about pensions now? Sure that's only something you'd have to worry about way down the road in the future!".

 

[Marianne]

What the recruitment consultant was actually saying was "Just hurry up and accept the offer so that I can get my commission."

 

[Fideroiste]

Hi guys,
Thanks alot, I had given up on this post as I though I had blown off all responses with my 2nd post. I was thinking of going with myadviser but it looks like he has disappeared or his website seems to have (I was even considering paying for one of his advise services). I have to say that I have learnt a lot e.g. what multi agency means when the ads are on the radio etc. I am going to discuss it with my brother over christmas. I am also waiting for a copy of the Consumer Association article called the "Pensions Puzzle" to see if I understand the general picture of the sector.
Thanks darag for suggesting about the SPC100 I had read about that but I am not sure how could I monitor how well it was doing e.g. 1, 2 yrs down the road, the guy that found out about that pension must have some knowledge of the financial markets or the financial sector to have found that deal. The pension question is easily answered for those in the public sector. My father tried to help but was suprised at how complicated the whole pensions thing is for the private sector (he is a teacher so he is sorted). It doesn't look like the pensions board review of the pensions sector is going to be anything revolutionary and I read that the minister doesn't want to implement its recommendation anyway.
I don't mean to be nosey but what general pension ideas have ye taken out e.g. PRSA Standard/Non-Stanard or one of the old stylee pensions. I will post back with updates.
Thanks again guys for all the support & have a nice festive season if I don't post back before then,
Fiachra.
P.S. I am aware that the longer I am leaving this decision the more tax relief I am lossing out on, bit of a lose:lose situation.

 

[ClubMan]

I don't mean to be nosey but what general pension ideas have ye taken out e.g. PRSA Standard/Non-Stanard or one of the old stylee pensions. I will post back with updates.

As I mentioned earlier I have the following:

• An Eagle Star regular contribution Standard PRSA (0%/1% charges) to which I am currently contributing my max (20%) via payroll. Originally set up on a standalone basis but subsequently integrated into my previous and current employers' schemes.
• An Eagle Star single contribution Standard PRSA (0%/1%) which is paid up and which was set up to accept some backdated lump sum contributions from my current employer due to initial start-up delays.
• An Eagle Star single contribution pension (0.75% annual management fee) which is paid up and which was used to transfer accumulated occupational pension funds into my previous employer's occupational scheme.
• An Eagle Star regular contribution pension (0.75% annual management fee, c. €3 monthly policy fee, can't remember the per contribution charges that applied) which is paid up and which was used for my previous employer's occupational scheme before they switched to PRSAs.
• An Hibernian single lump sum personal pension plan (0.75% annual management charge, 0% bid/offer spread) which is paid up and which I set up in order to take advantage of my outstanding pension tax relief in respect of the previous tax year a few years back.
• An Equitable Life With Profits (I know, I know... ) personal pension scheme (0.5% annual management fee, c. 3.5% bid-offer spread on contributions, subject to a 20%+ MVA on early encashment/transfer at the moment... ) which is paid up and which I started with a single lump sum contribution several years ago.
• An Equitable Life equity pension scheme (managed by Halifax - charges as above) which is paid up and which I ran as a personal pension plan for a few years while not in pensionable employment.

Simple - eh? I really should document all of these in detail somewhere in case I croak suddenly and nobody can find the details...