Pension Fund - Vanguard 500?

wigsa100 · 04-09-2014 6:59pm #1

Hi everyone.

Basically I'm trying to start a pension at the moment and have been doing some shopping around. I've met a couple of people from different companies who have shown me the funds that would be most applicable to me, etc. The usual stuff, basically.

Based on my research, in an ideal scenario, I would stick the vast majority of my pension fund, if not all of it, in an S&P Index like the Vanguard 500. However, the representatives that I've met have indicated that this isn't possible - that I won't be able to make such a selection.

I'm wondering if anyone knows whether there is any way of doing this with a pension fund? For example, opening a PRSA in a stockbroker, would I then be able to direct them to stick all my money where I want it? I would be a low risk investor and this, combined with the numerous horror stories I continue to read about people getting screwed in pension fund charges, make sticking most or all of it in an index fund far more appealing to me.

Anyone have any thoughts/experience?

tenifan · 04-09-2014 7:51pm

Not sure what's stopping you putting it in whatever fund you like. It's your money after all.

Henry Ford III · 05-09-2014 7:54am

A PRSA will be quite restricted fund wise. A personal pension might allow you track whatever index you fancy. Some allow hands on investing too.

As always get good advice.

daveirl · 05-09-2014 10:28am

This post has been deleted.

NewCorkLad · 05-09-2014 10:43am

daveirl wrote: »

This post has been deleted.

From the sounds of OPs post he is self employed hence Personal Pension would be far more flexible than a PRSA on charges and the flexibility of investing.

OP Irish Life self directed option might be the best for you, it gives you the flexibility to invest how you want and if you can find a good broker to deal with you should be able to keep to charges minimal.

daveirl · 05-09-2014 1:44pm

This post has been deleted.

wigsa100 · 05-09-2014 2:05pm

Thanks everyone for your replies. I'm not self employed, I'm a professional rugby player who plays PAYE but there is no employer pension contributions. Regarding the Irish Life fund mentioned, I actually met someone from Irish Life who shot down the idea when I mentioned the Vanguard.

It's all so confusing! Very hard to get impartial advice it seems!(Other than from you wonderful people of course!)

NewCorkLad · 05-09-2014 2:24pm

Hey Wigsa

You need to speak to an independent broker rather than speaking to direct agents if you want impartial advice. I hadnt looked up the Vanguard fund before so just assumed it was available under the Irish Life contract which after looking it isnt. Your main problem here whatever way you go about it, is you will have to pay the pension providers charges on top of Vanguards charges which will make it more expensive. Secondly the Vanguard 500 wouldn't be a low risk fund so it mightn't suit you as a low risk investor.

daveirl · 05-09-2014 2:28pm

This post has been deleted.

SBarrett · 05-09-2014 5:25pm

wigsa100 wrote: »

Hi everyone.

Basically I'm trying to start a pension at the moment and have been doing some shopping around. I've met a couple of people from different companies who have shown me the funds that would be most applicable to me, etc. The usual stuff, basically.

Based on my research, in an ideal scenario, I would stick the vast majority of my pension fund, if not all of it, in an S&P Index like the Vanguard 500. However, the representatives that I've met have indicated that this isn't possible - that I won't be able to make such a selection.

I'm wondering if anyone knows whether there is any way of doing this with a pension fund? For example, opening a PRSA in a stockbroker, would I then be able to direct them to stick all my money where I want it? I would be a low risk investor and this, combined with the numerous horror stories I continue to read about people getting screwed in pension fund charges, make sticking most or all of it in an index fund far more appealing to me.

Anyone have any thoughts/experience?

First of all, if you are a low risk investor, why are you putting most or all of your pension into a basket of American stocks? There is no risk diversification through investing in different asset classes and no geographical diversification either. The S&P500 fell -47.89% from June 2007 to March 2009. How would you have felt if you looked up the value of your fund and saw that the €10,000 you put in what worth €5,211? Would you have sleepless nights? (It has grown 203% since March 2009.)

When it comes to the specific fund, each life company has their own select number of funds to invest in. New Ireland have an S&P500 index fund to invest it. if you want the Vanguard one, you have to go use the self-directed option. Someone like Standard Life have a fairly cheap, execution only service with Stocktrade.

Regardless of which provider you go with, you will be paying at least 1% annual management charge as the pension provider will still want to be paid for wrapping and administrating your policy.

Steven

SBarrett · 05-09-2014 5:30pm

daveirl wrote: »

This post has been deleted.

It's the same as buying beer for €1 a bottle in the off licence and paying €5 for it in the pub.

The life company have costs to cover, light, heat, salaries, profit, broker fees, never mind the regulation costs that have to be covered. You should be able to reduce the management fee by paying an advisor a fee instead of him getting paid by commission.

Steven

wigsa100 · 06-09-2014 1:47am

Thanks again to everyone for their replies. I think I'm just going to have to slog it out with the research and referencing various people I meet against one another to try and get the best fit for me.

One last query - Is there anyone who would recommend against a pension at my age(23)? Am I too young to start sticking this money away already? Would I be better off sticking the money into an medium term s&p 500 fund or some other medium term option? I realise the tax relief is a massive factor but then I wonder if I'm disadvantaging myself in the medium term by having all this money tied away for, well, decades!

Thanks again guys, your knowledge is fantastic.

SBarrett · 06-09-2014 8:52am

Hi Wigsa

There was an argument on the AAM website that you are better off ploughing the money into paying off a mortgage instead and getting that paid off as quickly as possible before you start pension funding.

There is no denying that the power of compounding will have a massive effect on the growth of your fund over the next 40 years. The more you put in now, the better off you will be in the future.

I tell every client, the starting point is your Emergency fund. How much money do you need on deposit that you can access easily if needed? Start with building that up. Then look at short, medium and long term goals.

Do you have your own home? Do you want to get a mortgage soon? Anything else in the short/ medium term? Long term is obviously pension funding but can include using other assets.

There are huge demands on your money so you have to strike the balance.

Steven

wigsa100 · 06-09-2014 8:05pm

Thanks Steven.

I don't have a mortgage at the moment and have no plans to purchase in the near future. I'm renting in Limerick where rental prices(house prices too!) are quite low so I'm happy to rent for the foreseeable. I suppose my logic behind all of this is that I am quite efficient with my money, I'm a very good saver and rather than simply sticking all my money into a savings account I feel like I should be putting it to work in one form or another.

The pension initially seemed like an obvious option, in part due to the tax incentives of doing so but the more I research(including replies here which have been great) and examine charges on funds, the more I am questioning whether it's such a good idea.

My initial plan was, having 1500 to stick away each month, splitting it 5/5/5 between on deposit(Credit Union), pension and some sort of investment. I think I'm now beginning to lean more towards less in the pension and more on deposit but I would still be keen to put a decent bit of it to work in the medium term in some sort of fund.

SBarrett · 07-09-2014 9:24am

Hi Wigsa

Again, everything comes down to striking a balance. You have a decent amount of disposable income at present. With no major purchases in the short term, I would put more into an investment type plan than on deposit (while staying within your comfort zone).

Don't be put off pension funding by the charges. You appear to be looking at PRSA's, which have set charges which are laid down in legislation. There are cheaper personal pension plans available in the market, especially if done on a fee basis. As you appear to be going directly to the provider, you will be talking to the direct sales dept in each company and they cannot charge a fee for their work, so you want to ensure that you get it on a nil commission basis.

Steven

daveirl · 09-09-2014 1:34pm

This post has been deleted.

SBarrett · 09-09-2014 2:15pm

daveirl wrote: »

This post has been deleted.

Who are you buying the Blackrock fund from? Directly from Blackrock or from a wrapped product?

Henry Ford III · 09-09-2014 2:19pm

daveirl wrote: »

This post has been deleted.

Nope. PRSA's have a limited number of funds and options, and are expensive to have new funds approved.

SBarrett · 09-09-2014 2:20pm

Henry Ford III wrote: »

Nope. PRSA's have a limited number of funds and options, and are expensive to have new funds approved.

You can go down the non Standard PRSA route which isn't as restrictive.

daveirl · 09-09-2014 2:28pm

This post has been deleted.

SBarrett · 09-09-2014 2:33pm

daveirl wrote: »

This post has been deleted.

That's it exactly. Are you getting institutional prices i.e. 0.25% or retail prices i.e. 1%.

Pension Fund - Vanguard 500?

Comments