Should I stay in group pension scheme, or go it alone?

[Dingo]

Hi,
I hope the above title is appropriate for my question and that there are no other such threads.

I have just changed employment in the last 6 weeks.
I worked in my previous company for 5 years. I was eligible to join their pension scheme after the 1st year. (The employer were contributing to my pension, I didn't opt for the AVC)
At the end of the 5 years, the fund value is 6.5K, which I can transfer to my new pension scheme.

the new company will only contribute 6% if you opt in to the scheme and commit 9% of your salary.
I got my first pay check and between the jigs and reels will now take home 300 less than from my previous job.

I am just wondering, am I better to go it alone and sort my own pension out?
I did a quick calc on the pensions board website and they advise to put 14% of your salary into a pension. At the moment I am there or there abouts with the employer contributions, but based on their calcs I would only contribute 253 rather than 290.

Here's the deal..
My salary at the moment is 37400.
I am 27 (F, single) and would like to retire around 40 (never gonna happen, so let's say 65).

Would I be better off contributing to my own pension? If so, what amount is realistic?
I guess I should just get in touch with a financial adviser? Does anyone know a good one?

Any help would be appreciated!
Thanks

 

[ClubMan]

the new company will only contribute 6% if you opt in to the scheme and commit 9% of your salary.
I got my first pay check and between the jigs and reels will now take home 300 less than from my previous job.

You mean due to the pension deductions? How much were your earning before and what were the pension contributions (yours and employer's)?

but based on their calcs I would only contribute 253 rather than 290.

You mean you are contributing €290 now but the PB recommend €253? Are these figures inclusive of tax/PRSI relief? Note that calculators such as the PB's are only illustrative. As I calculate it €37400 x 15% / 12 months = €467.50 x 52% (to take account of 42% tax and 6% PRSI relief) = €243.

My salary at the moment is 37400.
I am 27

So you are currently maximising your pension tax/PRSI relief (i.e. 15% for somebody in their 20s) which is a good step for somebody who has identified pension savings as a priority.

and would like to retire around 40 (never gonna happen, so let's say 65).

I think that most or all pension have limits on when you can draw them down. I don't think that you can draw down at 40 in most or all cases.

What charges apply on the current occupational scheme?
In general if an employer will match employee contributions up to some amount then (all things being equal) it makes sense to avail of this.

 

[Guest126]

Hi Dingo

You would be pretty much mad to not opt in to you company plan.

Two reasons:

Company will not contribute to a personal arrangement you may set-up.
Company probably meets most of costs in running a group plan - if you go alone, then you alone will pay these costs.

One other point, earliest age you can retire is 50 under revenue rules.

 

[Dingo]

I was only joking about retiring at 40.. we'd all love to, but I know I can't!

 

[Dingo]

Thanks Clubman...

"You mean you are contributing €290 now but the PB recommend €253? Are these figures inclusive of tax/PRSI relief? Note that calculators such as the PB's are only illustrative. As I calculate it €37400 x 15% / 12 months = €467.50 x 52% (to take account of 42% tax and 6% PRSI relief) = €243."

The 253 does take into account tax & PRSI.

Let's say I did the above on my own and contributed 15% annually.
Do I get the flexibility to decrease / increase depending on my financial circumstances?
I have opted into the company scheme, but there is no flexibility for me to decrease my contributions should the need ever arise. It's set in my contract at 9%.

I am not sure what the admin charges are, but you're right, the company does pay these.

Would it be very risky to opt out and contribute 6% myself for the next year or so and then increase it next year / opt into the company scheme if my financial circumstances change? (they give me a big fat increase)!!!!

 

[ClubMan]

"You mean you are contributing €290 now but the PB recommend €253? Are these figures inclusive of tax/PRSI relief? Note that calculators such as the PB's are only illustrative. As I calculate it €37400 x 15% / 12 months = €467.50 x 52% (to take account of 42% tax and 6% PRSI relief) = €243."

The 253 does take into account tax & PRSI.

Probably not critical but I can't see where the €10 discrepancy between my figure and yours comes from.

Let's say I did the above on my own and contributed 15% annually.
Do I get the flexibility to decrease / increase depending on my financial circumstances?
I have opted into the company scheme, but there is no flexibility for me to decrease my contributions should the need ever arise. It's set in my contract at 9%.

Are you sure that you can never vary/stop/restart your occupational pension contributions? Granted if you drop below 9% personal contribution your employer will no longer contribute 6% but I would have thought it unusual to be bound indefinitely to the same contribution for the duration of the employment. As long as you can afford 9% then it's probably a bit of a no brainer to avail of the employer contribution and the issue of flexibility elsewhere is a bit of a moot point.

I am not sure what the admin charges are, but you're right, the company does pay these.

Are you sure about that!? In many cases the employee will pay a per contribution charge (often 0%-5% - covering bid/offer spread, commission, allocation rates etc.), a monthly policy fee (c. €5) and an annual management fee (often c. 0.75%-2%). The employer may cover certain setup and administration costs but they don't generally provide zero cost pensions to employees.

Would it be very risky to opt out and contribute 6% myself for the next year or so and then increase it next year / opt into the company scheme if my financial circumstances change? (they give me a big fat increase)!!!!

If you are going to forego the employer 6% contribution that you can otherwise afford to avail of then you would need very good reason to do so. I'm not sure that such a good reason exists but I am not privy to details of your overall financial situation.