Pension? - PRSA? - State Savings? - 41 years old & Overwhelmed

Bluebeard2

I'm 41, married with two children, don't have a pension - I had good savings but lost them during the recession years.

I've managed to save €20k in the past year or two (about €4500 in state savings, €2k in credit union and rest just sitting in bank ac). I am at a total loss as to where to put money for best returns. I'm not great with numbers or financial technicalities, but really need to sort out some savings for retirement.

At the moment I can put €1000 per month aside for the foreseeable future. Work circumstances could easily change (for better or worse), so I need built-in flexibility with whatever option I go with.

* I think Standard PRSA is probably the way to go, but I'm not sure.
* I've been told that buying an apartment to rent might be worth considering, but this seems kind of risky to me (even if I could get a mortgage).
* Long-term state Savings (10 years) could also be an option, but I'd lose the tax break PRSA's get with that money so not sure.

If you were starting out late what would you do?
Should I go to an independent financial advisor? If anyone could offer some direction/advice I'd really appreciate it.

coylemj

What is your employment status - in a regular job or self-employed?

The J Stands for Jay

Given the assets that you have, a rental property would likely be a terrible investment for you. If you are looking at as pension, just be aware that a standard PRSA could be an expensive option; you'd need to shop around, looking at all the products available to you.

Bluebeard2

@coylemj - employed full-time in a start-up company operating about four years.

@McGaggs - Why would rental be such a poor choice - just not enough return or apartment unlikely to sell at profit in 25+ years? I've read that some PRSA's have fees of 5 - 6%, while others are around 1%. I think some are managed while others are more passive (just put into a wide range of investments without much input from financial investors). Could you suggest an alternative maybe to PRSA's, like just standard pension or some other investment?

I thought the pension/PRSA would be good because there's tax savings to be claimed back.

Thanks both for your feedback.

OU812

Kind of in the same boat, myself. Right now just putting away as much money as possible into savings. To be honest the way the financial markets are I wouldn't be confident in handing over control of the little I have to anyone else right now. I suspended my PRSA a couple of years ago, had lost over half it's value & I might just start that back up in the future.

Wouldn't mind looking at share trading if it was easier to do online.

Bluebeard2

I'd consider share trading too, but would like to use those online trading 'learner' accounts for 6 months or more, just to see how I get on (the ones where you use fake money and trade for training purposes). Not sure which one to use being based in Ireland. I know trading is a discipline in itself, and I wouldn't put money into unless I was up to speed.

I feel the same way about putting what little I have into someone else's hands, and while I'd consider paying an independent financial adviser for guidance, I wonder how impartial their advice would actually be.

padjo5

OU812 wrote: »

Kind of in the same boat, myself. Right now just putting away as much money as possible into savings. To be honest the way the financial markets are I wouldn't be confident in handing over control of the little I have to anyone else right now. I suspended my PRSA a couple of years ago, had lost over half it's value & I might just start that back up in the future.

Wouldn't mind looking at share trading if it was easier to do online.

OU811 I hope you left your pot invested in the fund in which it lost it's value? If so it should have regained majority/all of the losses by this point? Keep saving, especially when it's falling (getting cheaper to buy).

OU812

Yes, still there. Hasn't quite recovered (about 30% down) but climbing very slowly

padjo5

@Bluebeard2, you are a little but certainly not too 'late' to start squirrelling, and you've done a fine job since you started to put your mind to it.

If I were you I'd figure out what my objective is, and at date in the future. You have family etc, consider requirements for access in this area. While you may be eligible for tax relief on pension payments I would suggest caution on stuffing all spare cash into one, until you consider the above.

No advisor in the world will be able to pick a pension 'fund' which is guaranteed to beat all others, hence a diversified and broad approach is often the most popular when it comes to funds.

Regarding PRSAs you can go to a Broker, Independent Financial Planner, or direct to a pension Provider. All will offer a pension which offers broadly similar funds, key difference will be the relationship/service and charging structure. If you need someone who will keep you disciplined and on-track a Broker/Planner who really looks after his/her client's best interests would be a good place to start your journey. If you don't need those things then going direct might work for you.

Just make sure your decision is an informed one! Paddy.

coylemj

OU812 wrote: »

I suspended my PRSA a couple of years ago, had lost over half it's value & I might just start that back up in the future.

A pension is a long-term investment, the money that you did not invest in the past few years would have shown a very good return and you're now planning to go back in to the market just in time for the next crash!

EGavigan

You shouldn't necessarily choose a non standard PRSA. The standard V non standard label has lost some of its meaning due to changes in the market.

With a standard PRSA fund choice can sometimes be limited. This can really hamper your efforts to get good growth. Charges on standard PRSA's are limited to max 5% (premium charge levied on your monthly contribution) and 1% (annual management charge on fund amount). The market has moved since PRSA's were established. If you are going to contribute €1k per month you can easily get a non standard PRSA with 0% premium charge and 1% annual management charge so there is no need to limit yourself by taking out a standard PRSA.

I wouldn't agree at all that fund choice is similar across providers. Some providers don't have certain funds, some providers hedge their forex risk, some don't. Some protect their bonds, some don't. It's easy to get information on your investment from some providers and you would get a nosebleed dealing with others. Some are efficient to deal with and others have difficultly carrying out the simplest of tasks.

With tax relief taken into account (especially if you pay higher rate) and given current interest rates, a pension is going to be beat the other options hands down, even if you go low risk. Of course you need to make sure that you retain sufficient emergency money as generally speaking you can't access your pension.

You wouldn't be handing over control of your funds to someone else. If you take out a PRSA/Personal Pension with a broker, you still have to authorise any fund switches etc.

On the other options you mention;

Property investment - totally undiversified (for one property landlords), illiquid and you have no control over how the quality of your investment will change over time (the area could improve or it could turn into a ghetto).

I was scanning over some old posts about property from 2005/06 last night and it was very informative. Loads of people were recommending small towns and villages that I know well. Saying that they were quaint, nice and quite, nice pub/restaurant, lovely lifestyle etc. because back in the day when the major cities were choking and impossible to buy in, these places were considered good options. Along comes the recession and now you couldn't give away a house in some of these same places.

As a pension it is totally unsuitable as it's difficult to time your exit. If you were invested in property in 2006 and you were turning 65 and retiring in say June of that year, would you have cashed out with things on the up and up? If you didn't you would more than likely have ended up having to work to your mid to late 70's to recover the value you lost.

State Savings - again, can be ok as part of your overall portfolio but the returns aren't what they used to be.

Online share trading - a great way to lose a lot of money really fast in my opinion.