Urgent pension choice help starting out.

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Willbo

Registered User
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I always said to myself that would set up pension by the age of 30. The time has rolled around some months ago and now that the 31st October deadline is approaching I would like to (if at all possible) have this set up and put in a lump sum of 10k that I have put together over the past year and will look to do so every year.

Brief background:

Full-time employment gross income of 53.5k.
Recently married but spouse in between jobs atm (usual salary of +-35k)
Able to easily save 2k per month.

I have been trawling the internet pension offering and advise on forums but it is unclear to me what the best path forward is specifically with the surprisingly high fees on various products.

My ideal set up would be to go for a 100% allocation to equities in line with the S&P 500 indexes etc. and let it ride out for the next 25ish years at which stage I would be looking to retire early as will have further income down the line and no mortgage.

I will be going to my branch to explore PRSA options but from what I have seen the bank's rates seem quite high. I wonder if there is something I am missing as 5% of every transfer of capital seems extortionate in addition to yearly 1% fees and would greatly eat into the long-term profits.

I understand that I have left it relatively late but am conscious of making the right decision even if past the deadline and would appreciate any suggestions or tips of which way to go. In essence I would be looking to use the pension contributions tax relief as an efficient method of building an index portfolio of which 25% would be cashed out and the rest drip fed at a rate where tax credits will cover any tax due.
 
Do you own your own home already?
If not then there may be an argument for prioritising that over pension contributions for the moment.
The usual mantra of "it's never too early (or late) to start a pension" comes with qualifications.
 
Willbo said:
I will be going to my branch to explore PRSA options but from what I have seen the bank's rates seem quite high. I wonder if there is something I am missing as 5% of every transfer of capital seems extortionate in addition to yearly 1% fees and would greatly eat into the long-term profits.
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You should aim for 100% allocation (i.e. nothing deducted from contributions) and an annual mangement fee of 0.75%-1% max (possibly even lower for very large amounts/transfers).

Skip your bank and maybe start here for example:
 
If you want to avoid the 5% allocation charge you should open a PRSA using an execution only broker.

To use this service you would need to choose your own funds and risk level.
Judging by your post you would be well able to do this.

There are a few execution only brokers who post on askaboitmoney.
PRSA.ie, ferga.com and LA Brokers.

You can email these and request a PRSA application pack.
They will email this back to you. Then choose your funds and risk level and send back the application forms.

There is no need for concern regarding any of these brokers as in all cases all your money will be sent directly to the PRSA provider. Zurich or Irish Life for example.
If you get going quickly you might manage to get set up in time to claim tax relief for last year.

When your PRSA is set up you can adjust your funds choice and risk levels and payment amounts at any time.
This can usually be done up to 4 times per year without incurring any fees.

So you don't need to worry to much about your investment strategy at the PRSA opening stage.
 
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Fortune said:
Don't go to a bank
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Thanks for the replies. I am aware that the bank will have the worst rates but was interested to see the difference in offering as its right beside my office but thanks for the heads up!


ClubMan said:
Do you own your own home already?
If not then there may be an argument for prioritising that over pension contributions for the moment.
The usual mantra of "it's never too early (or late) to start a pension" comes with qualifications.
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Yes and due to fortunate circumstances only 100k left at 2.5% so am looking to focus on the retirement fund and get saving asap.

Thank you to @S class and @ClubMan for the suggestion, it seems that an execution only PRSA is the way to go as I don't mind doing the work myself and given that there is some flexibility to make changes throughout the year gives me peace of mind.

I wonder how feasible it is to make it by end of month and assume that I will have to do the tax relief manually.
 
If you do your tax return online through ROS or myaccount you have until 14th November to make your PRSA payment and claim tax relief for last year. Otherwise it's 31st October.
 
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S class said:
If you do your tax return online through ROS or myaccount you have until 14th November to make your PRSA payment and claim tax relief for last year. Otherwise it's 31st October.
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Not sure what you mean there but would be great to have a little more time. I have not had any meaningful tax relief so has just been automatic PAYE payroll deductions.

Having looked at the execution only options I would be happy to go ahead and avail of 100% allocation with an AMF of 0.75% through Zurich.

Given that my employer offers no contributions or pension scheme for that matter I wonder how this will compare to the auto-enrolment from next September but can reassess when the time comes.
 
You can set up a revenue myaccount.

This is an online system which allows you to make tax returns and claim tax refunds etc.

Register for myAccount

Register for myAccount
www.revenue.ie www.revenue.ie

You can work out if the auto enrollment will be better.
If you are paying 40% tax the PRSA might be a better deal.

In the meantime you can operate your PRSA.

The PRSA can be suspended at any time and then restarted, so you have total flexibility in the future.
 
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Turns out I have a ROS account that I just had to update in order to get access. I'm not sure I follow the 14th November deadline as from information from broker and online seems that the 31st October is deadline for transfer of funds to PRSA.

Regarding the auto-enrollment it does indeed seem to make more sense on lower income levels but somethings to keep an eye out for in the future.
 
If you can get the €10k into a PRSA in the next week and declare it as your 2023 contribution then you'll probably be able to claim €4k back from Revenue next month. Bank transfers may take a few days and security restrictions on new payees can also limit the payment of funds so you really should be moving on this immediately if you can.

However if you're under 30 then you're limited to 15% of your salary (https://www.revenue.ie/en/jobs-and-pensions/pension/relief/tax-relief-limits.aspx) so that'll be less than €10k. Therefore you should declare the 15% limit as 2023 contribution and the balance as 2024 contribution.
 
Redzer said:
If you can get the €10k into a PRSA in the next week and declare it as your 2023 contribution then you'll probably be able to claim €4k back from Revenue next month. Bank transfers may take a few days and security restrictions on new payees can also limit the payment of funds so you really should be moving on this immediately if you can.
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OP, give them a cheque if this is possible.
 

Contributions paid to a PRSA for AVC purposes

This page refers to contributions paid to a Personal Retirement Savings Account for Additional Voluntary Contribution purposes
www.revenue.ie www.revenue.ie


Contributions paid to a PRSA for AVC purposes​

Tax relief for Additional Voluntary Contributions (AVCs) to Personal Retirement Savings Accounts (PRSAs) is based on the appropriate age-related percentage limit. This limit is based on the income from the employment in question.

This is reduced by any employee contributions to the pension scheme relating to the employment.

You may pay a once-off, or special, contribution after the end of a tax year. This must be done before the following 31 October.

If you make this payment, you can choose to have the tax relief for the contributions allowed in the earlier tax year. This must also be carried out before 31 October of the following year.

When you use Revenue Online Service (ROS), the deadlines for paying contributions and making this choice are extended.
 
Thanks for the info, application now sent off and hoping to have all sorted by Tuesday to be within the end of the month. Managed to get to 100% allocation at 0.75% AMC.

I've seen some vague info on the deadline extension to 14th November if using ROS but is that by enabled default even if I've never used it before (I have an active account though)? Surely if making a one off payment to PRSA, there's no other way to claim relief than doing it through ROS?
 
As far as I know, the November 14th 2014 extended deadline is available to both ROS (self-assessed) and myAccount (PAYE) users. This has been mentioned a few times here recently. But it wasn't always the case in the past. So you might want to double check with Revenue just in case the October 31st deadline applies to myAccount users. I couldn't find anything clearly definitive on this on the Revenue website so far.
 
ClubMan said:
As far as I know, the November 14th 2014 extended deadline is available to both ROS (self-assessed) and myAccount (PAYE) users. This has been mentioned a few times here recently. But it wasn't always the case in the past. So you might want to double check with Revenue just in case the October 31st deadline applies to myAccount users. I couldn't find anything clearly definitive on this on the Revenue website so far.
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I wouldn't necessarily be taking their word on this, or anything like this, without at the very least a supporting reference to a relevant Tax & Duty Manual or suchlike.
 
T McGibney said:
I wouldn't necessarily be taking their word on this, or anything like this, without at the very least a supporting reference to a relevant Tax & Duty Manual or suchlike.
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@S class - do you happen to have any reference for this?
S class said:
If you do your tax return online through ROS or myaccount you have until 14th November to make your PRSA payment and claim tax relief for last year. Otherwise it's 31st October.
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ClubMan said:
- do you happen to have any reference for this?
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https://www.revenue.ie/en/tax-profe...ins-tax-corporation-tax/part-38/38-06-01a.pdf Page 4

The ROS Pay and File deadline also applies to: the deadline for making Retirement Annuity Contract, Personal Retirement SavingsAccount or Additional Voluntary Contribution payments where tax relief is being claimedfor the 2023 tax year. The claim for relief can be made on the 2023 Form 11 (for selfassessed customers) or the online 2023 Form 12 (for PAYE customers). Detailed guidance is in Pensions manual Appendix 3
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