PRSA and ETFs

B

beggarinvestor

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Hi,

I have €68k in a pension from my old job. The pension type was an Occupational Pension.

I have another Occupational Pension in my current job which is sitting at €49k.

My question is a two parter:

  1. Can I transfer some, or all, of the money from the €68k pension to a PRSA and then invest it in an ETF?
  2. If I do this would the investment be subjected to the deemed disposable?

P.S. Would there be any advantage (compound interest) of moving the €68k into the same account as the €49k?
 
There is no tax on the funds inside a pension vehicle / wrapper.

Growth of pension funds is tax free.

Therefore, 41% exit tax does not apply to pension funds.


The other question - is it possible to choose an ETF as one of the funds in a PRSA - I don't know.
 
I've noticed a bit of a fixation on ETFs and pensions lately. Many (most?) pensions will offer passive index tracking funds which should be just as good as comparable ETFs. I'm not sure why some people seem to think that having a pension that specifically buys ETFs might be some sort of advantage...

Pensions can be merged but keeping them separate can offer flexibility such as being able to retire them at different times rather than taking pension benefits being a one time only all or nothing decision as it may be with a single consolidated pension.

You should check the charges that apply on each of your pensions. If they are generally reasonable then it could make sense to keep them separate.
 
ClubMan said:
I'm not sure why some people seem to think that having a pension that specifically buys ETFs might be some sort of advantage...
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They read it on Reddit.

But, the context wasn't fully explained or it was totally misinterpreted by the reader. Same problem with confusing execution only with self-directed.

It's probably a time thing, where people are looking for short cuts at lowest costs and don't really want to do the required research in advance of buying. Best to rely on what u/tommythehatchet posted as opposed to doing a bit more digging and taking your time. Bit of it creeping in here too but corrections/explanations are more immediate. Look at the amount of times that you (and others) have to post links to searches on AAM because you know it's been asked before but the poster thinks that it's incomprehensible that someone else could have thought of 'their' question before.

Anyway, OP can't transfer an OPS of that value to a PRSA without spending money on a Certificate of Benefits Comparison and it's highly likely that there are index tracking fund options, at lower costs, on the OPS than there are on a PRSA that they probably would have needed advice on. All the options available to would have been laid out in the leaving service option papers.

www.execution-only.ie
 
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ClubMan said:
I've noticed a bit of a fixation on ETFs and pensions lately. Many (most?) pensions will offer passive index tracking funds which should be just as good as comparable ETFs. I'm not sure why some people seem to think that having a pension that specifically buys ETFs might be some sort of advantage...
Click to expand...
I have my pension in Vanguard fund. Low cost, tracks the market, same as an ETF. Problem solved, no need to follow the American buzzword financial advice off reddit.
 
GSheehy said:
the context wasn't fully explained or it was totally misinterpreted by the reader
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No one on Reddit says put your 401k or IRA in ETFs, they say to put your non tax advantaged investments into ETFs. Somehow this is interpreted as a quest for a PRSA with self invested options to allow ETF trading.

The advice is literally put your pension into a tracker fund. People should stop reading at that point and go and do it
 
I also get occasional requests for ETFs within pension products that, on investigation, would be far better suited to a simple index-tracking fund.

  • Yes you can buy ETFs within a PRSA, but only if your PRSA has self-directed functionality, i.e. a trading account within the PRSA.
  • A PRSA with that sort of functionality can be expensive. You'll pay an annual charge for the PRSA itself. Often this will be higher than the annual charge for a PRSA that doesn't facilitate ETF trades. You'll pay trading charges. You'll pay an annual charge for the ETF.
  • If you're just looking to track one or more of the major indices, you can probably get exactly what you need by choosing a PRSA that offers index-tracking funds as standard, e.g. Vanguard index-tracking funds are available on the menu of Standard Life PRSA funds and BlackRock index-tracking funds are available on the menu of Royal London PRSA funds. If you can find funds to suit your requirement, this will be cheaper than buying ETFs.
  • You would buy ETFs within a pension if you want to buy an unusual ETF that's not available as a fund choice, e.g. tracking some obscure index etc.
  • The providers of self-administered and self-directed PRSAs have the right to veto certain ETFs if they conflict with PRSA rules. For example, if an ETF has a charge that includes a non-linear fee structure, e.g. bonus fees for performance above a certain threshold, that would be prohibited under PRSA charging rules.
  • If you do go for an ETF within a PRSA, gains are tax-exempt.
 
GSheehy said:
Look at the amount of times that you (and others) have to post links to searches on AAM because you know it's been asked before but the poster thinks that it's incomprehensible that someone else could have thought of 'their' question before.
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That's because the Search function on AAM is not very good. It's not intuitive that the best way to find an answer on this forum, is to leave the forum, open a new tab, go to Google, type your question, add "askaboutmoney.com" and search from there.
 
Corola said:
add "askaboutmoney.com" and search from there
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Better to add site:askaboutmoney.com

Key Post - The best way to search Askaboutmoney

I don't use the inbuilt search function as it's poor. Google is much better. Instead of typing "history of AIB standard variable rate" into askaboutmoney, type the following into Google site:www.askaboutmoney.com history of aib standard variable rate
www.askaboutmoney.com
 
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