Pension Funds

Canman457

I am new to this forum and I assume this topic has been covered many times. However, I cannot find this information online. I am researching pension funds and having an awful lot of hassle finding anything about it. My main aim is to find an indexed fund that invests approx 30% in a world bond index and 70% in a world equity index. My second and more important aim, is to find the lowest possible passive management fees. This information is near impossible to find on individual websites. I do not want to go through brokers as I don't want to be paying commissions.

Can anyone help?

Also, it is not even straight forward to find a list of pension providers in Ireland (not brokers!) Any help on this would be great too.

coylemj

Canman457 wrote: »

My main aim is to find an indexed fund that invests approx 30% in a world bond index and 70% in a world equity index.

If that's where you'd like your money invested, the best thing to do will be to check the various insurance company websites - Irish Life, Zurich etc. and find a fund that matches your preferred investment profile. Then when you've found such a fund, ask that insurance company for recommendations for pension providers who can steer your money to that fund.

But if you are more than 10 years away from retirement, I don't think that would be a good mix, you really should look at investing in a managed fund where the bulk of the money is invested in equities.

Canman457

Thanks for the reply. I just want low annual management charges and the majority of money in an equity fund. I dont believe that managed funds are worth the cost. Some pensions in Ireland charge up to 4% per annum. The lowest I can find online in Ireland is 0.75% which is insanely expensive in comparison to other countries.
I also have a pension in Australia where the annual charge is 0.08% per annum. It is a passive fund and has one the strongest performances of any fund over the past 10 years. I cant seem to find anything similar in Ireland.

FernandoTorres

Canman457 wrote: »

Thanks for the reply. I just want low annual management charges and the majority of money in an equity fund. I dont believe that managed funds are worth the cost. Some pensions in Ireland charge up to 4% per annum. The lowest I can find online in Ireland is 0.75% which is insanely expensive in comparison to other countries.
I also have a pension in Australia where the annual charge is 0.08% per annum. It is a passive fund and has one the strongest performances of any fund over the past 10 years. I cant seem to find anything similar in Ireland.

It's an absolute minefield trying to find detailed info about pensions in Ireland without going through an adviser. It's different to Australia in that you can't choose your own fund if you want your employer to pay into it. Do you know if you're looking for a PRSA or personal/executive pension? For PRSAs I found Davy and Standard Life to be decent options. You probably want one you can invest in ETFs as the managed fund selection in Ireland is appalling and fees are high.

Liam D Ferguson

I'm a broker and may be able to answer some of your queries. (You may not like the answers, but they'll be answers. )

For individual pension investors, the lowest annual charges available for index-tracking funds are 0.4% / 0.5% from a few companies including Friends First and New Ireland. These charges would be for lump sums. Monthly contributions tend to have higher charges due to higher admin costs for the pension company collecting Direct Debits etc. I know that you can get far lower fees in the US or Australia or other countries and I can only assume that economies of scale apply. There's also an issue in this country that pensions have to be "sold". People rarely proactively decide to set up their own pension fund, unless they're being offered it by their employer or being "sold" it by someone. In the US, the websites where you can go online and set up a pension do huge business; in Ireland such websites are a niche.

Brokers are the biggest source of pension business for any of the pension companies. The pension companies offer brokers a myriad of charging options to choose from. So each broker has a range of discretion of how much to charge. That's why you won't get the charges published by the pension companies. You might get the odd broker publishing what they as a firm charge.

Henry Ford III

You could go direct to the likes of a modern day Equitable Life.

p.s. That might not end well.

Canman457

Thank you for your reply. I thought I had a decent understanding of the Irish pension industry but the more I look into it, the more confusing it gets. 
Disregarding defined benefit schemes, my understanding was that, as an employee you contribute monthly payments to your fund. This is generally set up by your employer who must make 'meaningful' contributions to the fund. Are you saying that an employer will only contribute to their specified fund and not to one of your choice?
However, what is the best option if you have several small employer pension funds with several different employers (say if you move job every 5 years for 30 years you could have 6 different pension funds). What is the best course of action then? I am assuming PRSA pension funds are expensive to set up?
Should you stay with your employer's pension fund and transfer the balance every time you transfer job?

Heres Johnny

Your employer is under no obligation to do anything other than provide you with the name of a standard prsa provider and facilitate deductions through payroll.

You can move funds from an occupational pension into another occupational pension. Or put it into your own name through a buy out bond or personal retirement bond. Or you can leave them where they are and get them at retirement age.

Looking to do this on your own and looking for the cheapest fees without advice is a recipe for disaster. At least go and talk to some brokers or direct sales teams of some pension providers. You don't pay commission unless you take out a policy with them.

I work in actuarial with a pension provider. The compounding effect of a good fund over 20/30/40 years is well worth the charges. My own money is invested in a fund returning 8.5% a year average over last 30 years, although I'm in it less than 10 myself. I also have a prsa with another company from my early 20s and that's giving 6% since I started although I'm no longer paying into that one. I'm looking at building a retirement fund of approximately 1 million.

Annual management charge on current one is 0.5% and on standard prsa it is 1% which is the same for all standard prsa policies.

The J Stands for Jay

To attempt to answer your specific questions:

To find pension providers, have a look at the relevant registers from the central bank. As well as the investment company lists, a lot of them will be under life assurance companies. There'll be a lot in those lists that won't
do pensions for you, but it's the best list I'm aware of.
http://registers.centralbank.ie/DownloadsPage.aspx

To find out the fund annual management charges may mean searching on their websites. As you know you want passive investment, it'll not be as difficult a search. I think you'll be unlikely to find a blended passive fund that meets your needs, but you should be able to find passive equity and passive bonds and make the appropriate allocation yourself.

Some of the life assurance companies seem to use financial express for their fund information, so it may be worth googling around that. For example: https://toolkit.financialexpress.net/avivaie

The J Stands for Jay

To find the funds, they might include some of these terms in their names:

Passive
Tracker
Market
Index
Vanguard

Liam D Ferguson

Canman457 wrote: »

Disregarding defined benefit schemes, my understanding was that, as an employee you contribute monthly payments to your fund. This is generally set up by your employer who must make 'meaningful' contributions to the fund. Are you saying that an employer will only contribute to their specified fund and not to one of your choice?

A few points here...

• You get tax relief on your own contributions.
• If your employer sets up a pension arrangement for employees, if it's a scheme of PRSAs they are not required to make meaningful contributions. If it's an Occupational Pension Scheme, they are obliged to make a meaningful contribution to the scheme as a whole, but they are not obliged to make a contribution to your individual pot.
• If your employer has set up a pension arrangement for employees and have decided to make contributions, it's the employer that sets up the scheme, chooses the provider etc. Most employers will only contribute to the scheme that they have set up. If they have thirty employees, it's simpler to have one scheme to contribute to than to facilitate a load of schemes for different employees. I know that this works differently in other countries.
• Larger pension schemes (e.g. 100 employees or more) can sometimes have lower charges than smaller schemes or what you would be able to set up on your own.

FernandoTorres

Canman457 wrote: »

Thank you for your reply. I thought I had a decent understanding of the Irish pension industry but the more I look into it, the more confusing it gets.
Disregarding defined benefit schemes, my understanding was that, as an employee you contribute monthly payments to your fund. This is generally set up by your employer who must make 'meaningful' contributions to the fund. Are you saying that an employer will only contribute to their specified fund and not to one of your choice?
However, what is the best option if you have several small employer pension funds with several different employers (say if you move job every 5 years for 30 years you could have 6 different pension funds). What is the best course of action then? I am assuming PRSA pension funds are expensive to set up?
Should you stay with your employer's pension fund and transfer the balance every time you transfer job?

As I said, it's a minefield! In Australia you can pick from a huge range of providers yourself and then instruct your employer to pay the mandatory 9.5% contribution to your chosen fund. Within that fund you can invest in equities, ETFs, managed funds, term deposits etc and there are a range of low cost indexed options, some of which as low as 0.02% p.a. All companies are obliged to clearly state all fees and charges on their website.

In Ireland there are a range of possibilities:

1. Your employer has an occupational pension scheme. This is set up by the company with one of the life co's e.g. Zurich, Aviva, Irish Life etc and all the fees and investment options are set based on that deal. A lot of the bigger employers will have a system whereby if you contribute x% they will match it or pay a bit more. In my experience they usually have a high admin fee, a limited fund range and high management costs.

2. Your employer has no occupational scheme in which case they're obliged to provide you with "access" to a PRSA of their choosing with no obligation to make any employer contribution. You'll get tax relief on your contributions. You can also chose your own PRSA but the employer is again not obliged to do anything for you.

3. You have your own company in which case you can set up a personal pension or executive pension. Or you could set up an occupational pension plan. Each of these have their own set of rules and intricacies.

And all of this is before we get into the rules around what you can do with the fund at retirement which is another set of fun and games.

The way things are set up you're best speaking to a broker. I'd recommend an independent one and wouldn't go near any of the bank advisers with a barge pole. It's mostly still commission based but they'll be able to tell you exactly what fees apply. Hopefully with the proposed auto enrollment system things will get a bit simpler for the average Joe but I wouldn't hold my breath.

Canman457

Thanks Torres. That makes it a lot clearer. My confusion was definitely around learning from the Australian system (which makes perfect sense) and trying to apply it to the Irish one. I had assumed personal pensions were similar to the Australian system. I had not realised they were for company directors and for people who have their own company.

Thanks all for the advice!

Canman457

Thanks Torres. That makes it a lot clearer. My confusion was definitely around learning from the Australian system (which makes perfect sense) and trying to apply it to the Irish one. I had assumed personal pensions were similar to the Australian system. I had not realised they were for company directors and for people who have their own company.

Thanks all for the advice!

Heres Johnny

Personal pensions aren't for company owners and directors, they would set up occupational pension for themselves if they had any sense.
Personal pension would be for a sole trader, I.e. a plumber who hasn't incorporated a company.
Don't try make sense of this stuff on the internet. Go talk to someone.

Golden Horde

OP - this may be the type of fund you are looking for.

New Ireland Passive IRIS Fund 2033 onwards - http://fundcentre.newireland.ie/#factsheet/f-1098-null/
Passive and 70% equities, rest is bonds, property and cash.

This isn't advice - do your own research!