Starting a pension, where to get advice?

buzz55

hi all,

I'm finally starting a pension at the ripe old age of 32. I have a few quid alreayd in savings, dont own my own house and don't see that I will buy a house in the next few years either.

I know I can put in up to 20% of my earnings (can people afford to do this??) but I'm thinking more like 5% or 7% to start off with.

There will be no employer contribution unfortunately

Where should be my first port of call? To be honest, my knowledge of pensions/prsa is non existant. The company that I work for do use a broker, who seems to have our company's prsa's with one of the main insurance companies.

Maybe I should go & see an independent financial advisor, just to get a bigger picture of what I need to be doing all around for my future? I'm happy enough with my savings, and am relieved not to have bought a property during the boom. I guess I just feel I could always be doing more

coylemj

If you are in employment then your employer is obliged to set up a PRSA system for the employees, there may be an exemption for companies below a certain number of employees.

As far as I know there is a legal limit on the administrative/management charges on such a scheme so it may be to your benefit to join your employer's scheme because sole traders who set up their own pension scheme usually get fleeced with commission (to the broker) and management (clawback by the investment co.) charges.

If you are in your 30s you will need to start putting in a lot more than 5-7% unless you plan on living in poverty in your old age. Do not plan on increasing the contribution when you are older, if you're not buying a house you have no excuse not to stuff as much as you can afford starting right now. A Euro invested today will be worth a multiple of the Euro that you invest in 10 years time.

Bear in mind that by the time you get to your 60s the state old age pension will not be payable until you are 68, this applies to anyone born in or after 1961 so if you plan on retiring in your 50s you will be waiting a long time to get the contributory old age pension.

buzz55

Thanks for reply. So would you advise going as close to the 20% as possible? I know I often heard that one should put off a pension until you owned a property, but I'm guessing with the way the economy has changed over the last few years that this too has changed?

Thing is, I would hope that eventually, I will buy a house, so I need to continue saving for that. This reduces the amount I can realisticaly afford to put in to a pension each month.

The company I work for does have a PRSA scheme set up, its just that the broker we use seems to automatically put everyone with the same insurer. would that be normal?

Kennie1

Your employer is obliged to designate a PRSA provider which means that 1 company only would be used for all PRSA's as if there was two or more there would be more admin for the employer. Your employer has to designate a company regardless whether he/she has one employee or a hundred, once that employee is working for more than 6 months the employer has to offer a PRSA facility regardless whether the employee is part time, contract worker or permanent.

The broker would have a range of pensions companies to chose from and would have recommended this one based on his/her opnion as the best provider. The charges are capped at 5% premium charge and 1% AMC but there is lower charges to be got out there if you decide to pay it by D.D. and chose your own PRSA provider.

The level of contribution would depend on how large of a pension you would require. In an ideal world you would fund for 66% of salary. You should put in the 20% if you can as you have no mortgage at the moment, when you have other financial commitments then you could look at reducing this percentage if need be at that time.

Finally you should ask your employer if he/she would consider setting up a "one member scheme" instead of a PRSA scheme as your contributions to this type of pension would be exempt from USC. I personally would not recommend anyone to go into a PRSA where there would be an option for a "one member scheme".