The Best Personal Pensions For Self-Employed Sole Trader In Irish Marketplace

[Younginvestor93]

Hi,

I am 27 and looking to set up a Personal Pension within Ireland. I earn roughly 36k a year and my salary will probably stay close to that for many years but I will be able to max my pension contributions every year (if that matters for recommendations).

I have a small PRSA pension of 6000, it is with Irish Life at 95% allocation rate and 1% charge so I will need to move this also to a better PRSA (My two best options for PRSA in Ireland are DAVY and STANDARD LIFE, from my research thus far), but I understand that a personal pension works out cheaper and overall better than a PRSA pension.

Can anyone advise me on the differences and benefits of either and how I can access the best pension and the cheapest rates, go direct or get a broker?

A little lost on this area as with PRSA's, I can view the pensions authority spreadsheet and look at all options but there is very little info on personal pensions accessible to Irish people from what I have seen.

Thanks, I am trying to sort my finances whilst the lockdown is on so I am set up in the best way for my future.

 

[AAAContributor]

my salary will probably stay close to that for many years but I will be able to max my pension contributions every year (if that matters for recommendations)

What area do you work in?

Are your medium-term prospects limited based on the industry you are in or your personal circumstances?

This for me is the most important item to be addressed in relation to your post above and the many posts you have made on AAM in the last few days.

You are definitely burying yourself in the nuances of TERs, AMCs, etc. and the minutiae of pre and post-tax investing from what I can read.

If you are likely to stay at an income level of €36k, expense ratios and the absolutely perfect pension product aren't a big deal. You are right to be mindful of them (and the compounding effect) as it is one of the few things within an investor's control, but is there a better focus for your time and energies right now? Lockdown is now extended until Mar 5th. I'd spend another few hours, canvass a few more replies on this issue, and then the rest of lockdown looking at the bigger picture if you are seeking to get a grip on your finances.

If you are going to maximise your pension contributions for the next few years, is there anything then that you are cutting back on in the here and now that could be more beneficial and deliver more value for you? What, if anything, are you sacrificing? Investment in your business (marketing, equipment/tech etc.)? Investment in your human capital (education, courses, meeting contacts that could potentially advise/mentor you)?

Should you actually be spending money now rather than putting the full 15% away up to age 30 and then 20% post-30 and residual amounts in ETFs/investment trusts?

If you are self-employed and on €36k with limited prospects of any increases, is there any potential of becoming an employee and looking at employers that have an occupational scheme where some of the above issues become moot?

Instead of contributing to a pension or post-tax investment product, should you/can you spend a meaningful sum on strategies that may move the dial on your level of income?

Best of luck with everything and apologies for the off-topic reply.

 

[Younginvestor93]

What area do you work in?

Are your medium-term prospects limited based on the industry you are in or your personal circumstances?

You are definitely burying yourself in the nuances of TERs, AMCs, etc. and the minutiae of pre and post-tax investing from what I can read.

If you are likely to stay at an income level of €36k, expense ratios and the absolutely perfect pension product aren't a big deal. You are right to be mindful of them (and the compounding effect) as it is one of the few things within an investor's control, but is there a better focus for your time and energies right now? Lockdown is now extended until Mar 5th. I'd spend another few hours, canvass a few more replies on this issue, and then the rest of lockdown looking at the bigger picture if you are seeking to get a grip on your finances.

Should you actually be spending money now rather than putting the full 15% away up to age 30 and then 20% post-30 and residual amounts in ETFs/investment trusts?

Best of luck with everything and apologies for the off-topic reply.

Thanks for your detailed response and suggestion. My personal circumstances will mean I do not think I will earn more than 35-40k and also my industry but I am happy with that. I am happy to stay under the tax bracket and work less hours overall and still get a good salary. I plan on having income from investments, and perhaps rental income from a property that may be inherited in the future.

I also plan on investing my money to provide me with an additional source of revenue.

I understand your point on using the money now to invest in myself to increase my income by 5% which would be 5% every year.

 

[RedOnion]

I plan on having income from investments, and perhaps rental income from a property that may be inherited in the future.

Just remember, if subject to income tax, these will push you into the higher rate tax bracket. While the amount that you'll get relief on is a percentage of your earned income, the relief will be at your marginal rate.

You keep looking for 'the best' without saying what 'best' looks like. Is it fees? Flexibility to reduce contribution? Investment choices?

With personal pensions, it's not just about 'best value' over a PRSA, but they open up more flexibility of investment choice. The fees aren't standardised like with a PRSA, but vary depending on the amount you're investing, and what you want to invest in.
You can move funds between investments, and between insurance companies if you can find a better option once you've a 'pot' built up. Watch out for early redemption charges (usually apply for a few years where a broker is paid a commission to set it up for you).

At the initial level you're making investments, 0.5% difference in charges is 30 euro per year. Don't get too hung up on it. It's nothing in the scheme of your overall finances.

Personally, I would talk to a good broker, rather than try to wade through it myself. They'll explain all the differences between your options as they'll deal with PRSAs and Personal Pensions. They'll deal with multiple insurance companies, and why they recommend one over another.

 

[Younginvestor93]

You keep looking for 'the best' without saying what 'best' looks like. Is it fees? Flexibility to reduce contribution? Investment choices?

With personal pensions, it's not just about 'best value' over a PRSA, but they open up more flexibility of investment choice. The fees aren't standardised like with a PRSA, but vary depending on the amount you're investing, and what you want to invest in.
You can move funds between investments, and between insurance companies if you can find a better option once you've a 'pot' built up. Watch out for early redemption charges (usually apply for a few years where a broker is paid a commission to set it up for you).

Thanks RedOnion.
The best is being able to invest in world equities for dirt cheap and have cheap annual management charge.
My fund will eventually be a few hundred thousand in say 30 years and then a 0.20 extra management charge would be 6000. That is a lot of money every year.

I have been calling around and I can only get Zurich at 1% 100% allocation, Standard Life similar and then rang an online broker and they tell me it won't be anything under 0.9 total, so it really comes in basically the same as a DAVY Prsa.

If there are AMC charges of 0.65% and low fund charges out there, that gives you a very low charge for a personal pension. I have no idea how to get them and who to ask?

 

[_OkGo_]

My fund will eventually be a few hundred thousand in say 30 years and then a 0.20 extra management charge would be 6000

0.2% = 0.002
€6,000/0.002 = €3,000,000
You are out by a decimal place The extra 0.2% that you are worried about will be in the hundreds, not the thousands.

 

[RedOnion]

My fund will eventually be a few hundred thousand

Personally, I'd worry about that later. You can move the funds easily between providers, once there are early redemption fees.

Generally speaking, if you want lower charges, you need 100k + before rates can be negotiated from standard.

There are costs to run your pension, and keep it compliant. The insurance company charging a percentage is running at a loss on a fund of 6k.

 

[Younginvestor93]

Personally, I'd worry about that later. You can move the funds easily between providers, once there are early redemption fees.

Generally speaking, if you want lower charges, you need 100k + before rates can be negotiated from standard.

There are costs to run your pension, and keep it compliant. The insurance company charging a percentage is running at a loss on a fund of 6k.

So maybe on a 6k PRSA pension I can't get any better than DAVY?

I still don't know whether I should just keep my PRSA only or go for a PRSA and a Personal Pension then? I can never trasnfer my PRSA into a Personal Pension and achieve those lower management fees later as I will be limited to the PRSA unless I start one.

 

[Younginvestor93]

Can anyone advise who to approach/call. what brokers/ company providers should I contact that can provide with the best/cheapest option for a personal pension?

Thanks

 

[GSheehy]

Can anyone advise who to approach/call. what brokers/ company providers should I contact that can provide with the best/cheapest option for a personal pension?

Can I suggest @LDFerguson and/or @SBarrett

If you were contacting me, you'd have to know exactly what you're looking for in terms of product, provider and fund/s as what I do is execution only.

There'd be no benefit to you to contact a product provider directly.

Gerard

www.prsa.ie