Should I go ahead with this Standard PRSA offer?

Mona G

Registered User
Messages
42
Hello,

I will turn 46 early next year. For almost three months now, I have been trying to find a pensions scheme to join to start saving for my retirement. Late, I know, but this is how it worked out.

Before I found the current financial advisor, recommended by a colleague, I have been talking to others – all tried to get me on a personal pension or a non-standard PRSA. I have also paid for a consultation with an advisor who provided lots of irrelevant copy + paste information with very little on what I have specifically asked for, and at the end he has commented that what he would get paid in commission would be very little compared to the tax saving I would get so he was not prepared to do ‘the enormous amount of work I have asked him to do’.

After some research, I have decided that the best option for me would be a standard PRSA (not the one offered by my current employer).

My intention is to pay 200 euro regular contributions per month and top up once a year, depending on how much I can put aside (we also intend to buy a property so we keep saving for the deposit as well).

My current financial advisor has offered a Zurich standard PRSA. Apparently this product meets my main requirements, including:
- no penalties for stopping and restarting contributions;
- no penalties if I need to reduce, increase or pause contributions;
- lump sum top ups are possible;
- can be transferred overseas (subject to certain criteria);
- it is appropriate for future purchase of an Annuity.

The financial advisor also said as follows:
- charges cannot be reduced, in fact – they cannot be changed;
- minimum amount I need to contribute is 10 euro per month;
- I can switch between investment funds (up to 4 free switches per year);
- there is no bid/ offer spread.

I have asked for a list of all charges and fees associated with the plan. The financial advisor wrote that 97% of the amount I will invest will be allocated to the fund, and there is an AMC of 1%. However, he followed up with an email stating that his commission is based on my allocation, which he suggested at 98%, and he offered me 2 options to chose from:
1. 5% initial commission and 1% renewal commission or
2. 2% initial commission and 2% renewal commission.

Is the financial advisor’s offer good for me? If yes, which one of the commission options should I chose?

I will be most grateful for comments and advice.

All the best,

Mona
 
Hi Mona G

I commend you on your thoroughness.

I can’t answer your question directly – but off the top of my head here are a couple of things I have picked up over the years which perhaps may help you.

Don’t underestimate fund choice. For example ... is India/China available, Emerging markets, Smaller company funds, Global real estate, Gold etc. Personally - I like to diversify and this would be important to me ...... but it would not be to many.

How many free fund switches per year are allowed – u mention 4 and that is good (I think Standard Life offer 12 .... some offer only one I think)

The headline AMC is 1% ....... But ask what the total expense ratio is ...... the TER is a truer reflection of the fund cost and will in most cases be higher than 1% p.a. It will vary by fund and by Company.

As regard the commission – will u receive an allocation of 98% irrespective of commission option 1 or 2? If yes – then it may not directly matter in terms of your policy performance which commission option is selected.

However the Financial Advisor will perhaps be better incentivised to take more of an interest in your policy with option 2 as they will be better rewarded if u continue to pay your contributions each year.

Perhaps ask for a quote showing the projected fund value if a) Commission Option 1 is chosen and then b) Commission option 2 is chosen.

kind regards
 
Try a stockbroker for a quote. way simpler when it comes to charging and wider range of investment solutions.

If it were me I’d more interested in the investment selection and product and how they are the most suitable to my situation. Once they are sorted you should then be focused on the fees and getting them down.
 
As per Protocol, try labrokers, it will cost 1% per year and 100% of your money gets invested. They will not give advice for this execution only though.
For the amount you are putting in you will not want it eaten by commissions or charges so execution only should be ok.
When you are choosing your fund look for a fund with a good performance record over the past 10 years. Doesn't guarantee anything but going by form is better than choosing a fund with an unknown or poor performance over the past few years.

And about being late, the right time to start a pension is always now. So never too late.
 
Thank you so much @1dave123, @Fergal19, @Protocol and @Laughahalla for your replies!

This just shows how illiterate I am when it comes to finances. ‘Fund choice’, ‘total expense ratio’, ‘investment selection’… I wouldn’t even know to ask about these, and I don’t think I would fully understand the answers anyway, not to mention being able to ask follow up questions.

I don’t think I can ask my current advisor any more questions. He has just sent me an email to get in touch if I want to go ahead with his offer.

My dealings with ‘financial advisors’ left me disillusioned – regardless of how clearly I thought I have described my situation and expressed need for a professional advice that is in my best interest, the replies I got were focused on selected products they wanted me to sign up to, and any further enquiries were perceived as a nuisance. This is why I went for a paid consultation, hoping to get someone to talk me though what you have mentioned, and whatever else I would need to know, without feeling like I’m wasting someone’s time. This consultation, as you know, did not go that well.

Work is hectic at the moment, so I have only part of my lunch available to write. I will do more research over the weekend on the points you have raised.

Thank you all so much!

P.S. If you could recommend a good independent financial advisor, who could go through some of this with me, please do.
 
I wouldn't bother paying anybody.

You can learn it all here, or with a few hours browsing the web.

Ask us.

I suggest a passive fund, invested in a wide range of equities.

If you are 46, and plan to be saving regularly for 20 years, then go for a 100% equities passive fund.

There you go.
 
Sound advice, thank you! I should have come here in the first place.

I will do some more reading, now knowing what to look for. And since I am not seen as a pest here, I may be back with a tricky question or two!
 
The catch is, you won't get any advice, they are execution only brokers.

You won't get any advice on i) which product provider to go with, ii) which product suits you or iii) which fund/s to invest in.

I'd normally follow up on a request to my execution only websites with an email to the effect of - "If you require any assistance in completing the proposal form, clarifying the terms of the product or in finding out more about the service, you can contact me at this e-mail address. "

In the vast majority of cases, no help is sought.

In some cases administrative advice/help is required. For example, Can I transfer my existing PRSA to this new execution only one? How do I claim tax relief on my execution only AVC PRSA if I can't do it via payroll? My employer has a PRSA Scheme via XYZ company (with 3% contribution charge) but they've no issue with appointing the company that you deal with so that I can avail of a 0% contribution charge - can that be done? What's the protocol on moving my existing pension to a Pension Retirement Bond via the information pack I requested? etc. etc.

Not everyone knows about AAM.

Not sure how other execution only brokers work but I've no issue answering those type of questions, so there is interaction and a non face-to-face relationship.

I just draw the line under i), ii) and iii) - but don't see it as a 'catch'.
 
Back
Top