PRSA from previous job

I

INYWIFNW

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I am 38 and am a member of a DB pension scheme. I recently set up a AVC PRSA on an execution-only basis and contribute a modest amount on a monthly basis. I pay 0.75% AMC with 100% allocation.

I had a PRSA in my previous job which is now worth €125k. As far as I’m aware, I’m unable to contribute further to it. It’s invested in one of the Zurich funds that is mainly equities and has done well recently. The AMC is 1%.

I have read and done my best to follow the “key post” on what to do with pensions from a previous employer, and I think I could potentially transfer the old PRSA into the DB scheme/AVC PRSA, but I don’t want to do that as I would like the option and flexibility of being able to access the old PRSA before the DB scheme/AVC PRSA.

My question is: is there anything that I can do with the old PRSA to reduce the 1% AMC, whilst retaining the flexibility of keeping it separate from the DB scheme/AVC PRSA?

Thanks.
 
INYWIFNW said:
My question is: is there anything that I can do with the old PRSA to reduce the 1% AMC, whilst retaining the flexibility of keeping it separate from the DB scheme/AVC PRSA?
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Switch it to a lower charging PRSA via an execution only broker?
This thread might be of interest:

Royal London Ireland enters Personal Retirement Savings Account market

Always good to have more competition. I've not yet seen the charging structure. https://www.rte.ie/news/business/2024/1125/1482795-royal-london-irishs-prsa-market/
www.askaboutmoney.com
 
Okay, thanks for that. So, I can just move the PRSA to a lower charging PRSA on an execution-only basis, assuming I am comfortable choosing my own fund(s).

It seems like a no brainer to do this, or am I missing something? At the moment, the PRSA is in a Zurich fund that I am happy with and I have no intention of changing in the short or medium term. So, I don’t need any “advice” on fund selection etc. But I’m being charged 1% AMC. I know some of the execution-only brokers can offer this fund at 0.75% AMC. Over, say, 25 years, I guess the additional 0.25% AMC would cost me thousands.

Am I losing out on anything if I move the PRSA to the lower AMC with the execution-only broker?
 

You won't lose out anything at all if you replace an existing Zurich Life PRSA with a 1% AMC to another Zurich Life PRSA with 0.75% AMC. The only difference between the two products is the lower charge.

What you may lose out on is advice from the broker. Execution only isn't just about choosing your fund. A broker offering advice can advise you on competing products as they launch, other options that might suit you like splitting your PRSA into a couple of smaller PRSAs, how this PRSA fits into your overall retirement plan, options at retirement etc. An execution only service arranges the product only and offers no advice.

If you don't need advice, execution only is better. If you do, don't go execution-only.
 
Thanks for your response. It’s very thought-provoking.

At the moment, I pay Zurich 1% AMC and I haven’t heard from them, aside from administrative things like annual statements of account and the like, since I set up the PRSA over 10 years ago when I started my first proper job. I am certainly not receiving any advice on the things you mention above. Should I be? My contact in there is an extremely nice guy and very responsive if I need a document for my records or if I need to change address or something, but there’s no advice as such. Actually, the only thing he said to me when setting up the PRSA was to forget about it and let it grow, which in hindsight was good advice as it’s worth a lot more than the contributions and I wasn’t tempted to meddle with it when the markets were tanking during covid.

When you say brokers who provide the kind of advice you mention above, do you mean the likes of a financial planner who carries out a full review of your finances, advises you, and then you may keep in touch with on an annual or more regular basis with to check how things are going?

This is only a small PRSA and isn’t my main pension scheme, but I’d like to avoid having an unnecessary 0.25% per annum drag on it for 2-3 decades if I’m not getting anything for that 0.25% per annum.
 
Probably not from the underwriter. Maybe from a broker/intermediary if one arranged the pension and depending on what your agreement with them was (execution only (no advice), full service (advice), etc.).
A non execution only pension broker may offer advice specifically on pension and related issues but not on overall financial matters unless you engage them on that basis, and pay them for this service.

If this is only a small part of your overall pension savings and you're happy to choose the asset allocation/fund(s) yourself then maybe just transfer it to a lower cost provider if necessary and forget about it again for the moment.

Maybe this thread might be of interest to you?

Royal London Ireland enters Personal Retirement Savings Account market

Always good to have more competition. I've not yet seen the charging structure. https://www.rte.ie/news/business/2024/1125/1482795-royal-london-irishs-prsa-market/
www.askaboutmoney.com

However if you think that your overall financial/personal circumstances need a systematic and holistic review then you should probably consider getting that done. Maybe even start here by doing a Money Makeover here?

Key Post - Basic information required for the "Money Makeover" forum

It can be difficult, but please try to use a meaningful title in your thread For example "27 year old with mortgage arrears". You will get a much better and much more coherent answer if you give as much information as possible in your first post. For example, if you give your mortgage rate, it...
www.askaboutmoney.com
 
@LDFerguson Can I check something please? Or anyone else who knows!

In the excellent thread about The Single Public Service Pension Scheme @Ent319 discussed using an employer AVC to fund buying additional defined benefit pension "years" using The Single Scheme Purchase Facility by way of transferring the AVC fund to whatever its equivalent value would be in terms of additional pension years. I suppose this is a tax efficient way of buying the benefits because you don't have to "cash in" the AVC and pay taxes on it and then use the cash to pay for the additional pension benefits.

@Ent319 states...

But above you mentioned...
LDFerguson said:
A broker offering advice can advise you on competing products as they launch, other options that might suit you like splitting your PRSA into a couple of smaller PRSAs,
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If I started paying in to an AVC via the payroll of my employer (HSE) at retirement could I split that in to two AVCs then use one to buy back any additional DB pension benefits I might be entitled to and, let's say, convert what is left in the other AVC to an ARF?

I am wondering do I really need to set up two separate AVC from the start or can I split one later on? I'm thinking I will loose out on the compounding effect of fund growth if I split my AVCs in to two separate funds rather then have everything in one? Secondly it might be tricky to work out how much I need to keep contributing to the one AVC I set up to buy the pension benefits by way of transfer. Apparently you forfeit anything from the AVC fund that was in excess of what was required to buy the benefits. So I wouldn't want that AVC fund to be more than needed... or less either.

Thank you.
 
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Hi Charlie,

When I wrote about splitting PRSAs, I was thinking about PRSAs and not AVC PRSAs as the two have different rules. Splitting a PRSA enables you to "retire" each one at different times, which can be useful for some. You can't do that with an AVC PRSA as AVCs and AVC PRSAs relating to the same employment must all be retired at the same time.

That said, I'm aware your query is about something else. If you have a couple of AVC PRSAs, I suspect you could use one to purchase referable amounts in the Single Scheme in the future while leaving the other to go into an ARF at retirement. But I don't know for certain as it's not something I've been asked to do before. Maybe one of the other brokers on here can add?

CharlieMac said:
I'm thinking I will loose out on the compounding effect of fund growth if I split my AVCs in to two separate funds rather then have everything in one?
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You won't if they're AVC PRSAs. AVC PRSAs have no fixed costs; only percentages. So if, for example, you have two AVC PRSAs worth €5,000 each and the chosen fund grows by 5% in a year, you'll get €500 growth combined - €250 each. If you have one AVC PRSA worth €10,000 you'll get the exact same amount of growth - €500. Other products including AVCs (not AVC PRSAs) might have fixed charges which make it inadvisable to have several, but not AVC PRSAs.
 
Thanks Clubman.

For a few reasons, I’m keen to stick with the Zurich fund I’m in. I’ve also posted a Money Makeover before which was very helpful, and which I’m going to update soon as my circumstances have changed a bit since.

So, with regard to this old PRSA, the choice seems to be:

1. Do nothing and continue to pay 1% AMC and receive no advice.

2. Move the PRSA to a lower charging PRSA on an execution-only basis - same product, 0.75% AMC and continue to receive no advice.

3. Engage a non execution-only pension broker, receive advice of the type LDFerguson mentions above, and pay an AMC of X amount (with X being whatever the broker charges).

I’m open to option 3 if there is value to be added by such a broker. But my sense - and I’m totally open to correction on this - is that the value in such advice will be more meaningful closer to retirement, and for now, regardless of what advice I receive, I will likely just be leaving the old PRSA in the high-risk Zurich fund for the foreseeable future.
 
You could transfer your PRSA to an execution only broker now and nearer to your retirement date, if you feel you need to get advice, you could then transfer your PRSA back to an advice broker.

Or you could pay a separate adviser.

If you are a regular reader on AAM you are presumably capable of figuring out your own financial plan.
 
@INYWIFNW Did you set the original PRSA up with Zurich directly and was there a contribution charge when you were contributing to it? If there was then you have an advised product.

@CharlieMac Not sure if the employer pension dept. would allow you to buy additional DB benefit right before retirement. You should ask them if they have a minimum period on that.

Failing that, you'd still have the option to buy the certainty of an annuity.
 
@LDFerguson
Thanks for clarifying there is no disadvantage in terms of fund growth potential of having two AVC PRSAs. So Pot(A) + Pot(B) should be able to grow to the same amount as a single Pot(A+B). Makes sense if the contributions to both Pots are directed to invest in the same fund.

My interest in splitting one AVC PRSA in to two is not to have the option to retire them at different times, I would intend on retiring them both at the same time. My question is: at the time of retiring a single AVC PRSA can it be split in to two to facilitate this scenario: one to buy the referable amounts without having to cash it in first (so that is tax efficient). Then the other is used for an ARF. I don't see why it would not be possible to do that? The aim is to maximise the retirement benefit in a tax efficient way, not to fund some other unrelated lifestyle benefit.

@GSheehy
Thanks for that heads up. So now I understand: If buying back pension years has a "closing date" that is a few years before I would like to retire then buying back years with an AVC PRSA is not an option at all since I would HAVE to retire in order to be able to use my AVC PRSA to do that.

If people are not sure I will email the Single Pension Scheme or my local pensions officer (whoever that is).
 
GSheehy said:
@INYWIFNW Did you set the original PRSA up with Zurich directly and was there a contribution charge when you were contributing to it? If there was then you have an advised product.
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When I started my job, my then employer arranged for a few pension providers to present to us with a view to us setting up a PRSA. The charges were all the same and I liked the Zurich guy the most so I went with them. I don’t remember if I paid a contribution charge. I contributed about 5% of my salary and my then employer matched it.

I got in touch with my contact in Zurich and explained that I was thinking of moving to a lower charging PRSA with 0.75% AMC via a broker and if there was any benefit to be had with sticking with Zurich. He said there would be no difference in dealing with a broker or him directly and said 0.75% is a good deal.

This suggests to me that I don’t have an advice product as it currently stands.
 
25bps compounded for 25 years is a 6.6% greater return.

I’m in a similar situation to yourself in that I have funds I want to leave alone to grow for decades. I’m comfortable with my own investment strategy and fees are my only real concern.

On the advice side you can always move it to a product where you might benefit from advice closer to retirement age.
 
GSheehy said:
It (the allocation rate) would be on your policy certificate. If you don't have the original paper copy then it may be on your portal under Documents.
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Yes, thanks, I see that now. Allocation rate was 98% so contribution charge was 2%. So, that means it is an advised product? Possibly a stupid question, but does that mean I should be getting some advice? I moved employer 3.5 years ago and therefore haven’t contributed to it since, so I’m not sure what advice I could reasonably expect, but in the absence of receiving any such advice, I think it’s almost a no brainer to go to 0.75% with an execution-only broker.
 
GSheehy said:
Yes, I would say so and the advisor probably did a fact find at that stage.

If you looked for it, I'd say you'd have to get it. Stopping payments does not mean the advised product status would stop.
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Thanks again. Out of interest, what kind of advice would you look for in these circumstances from an advisor? I can’t think of much to ask, other than whether I’m in the right fund. Am I right in saying that the advisor would probably just ask me to do the risk assessment questionnaire again?
 
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