PRSA - how to choose broker and provider, and best set-up

creakingGate21

Hi,

I have recently move to Ireland from the UK, and I work as the sole Ireland employee for a company based in the UK. I am in my early forties, and in the higher tax bracket and paying the higher PRSI charge. Given my skills set, if at some point in the future I was to change job, I think it would be to the public sector in Ireland.

I feel really stuck and unsure who to ask questions to, and yet I need to get things set up and my pension in place. If you can spare a moment to share any wisdom I would really really appreciate it.

I list the questions below, If you can help with any I would really appreciate it.

1) The company is happy to either pay me without salary sacrifice; to do salary sacrifice; or to do pension contributions as an additional benefit outside of salary - just so long as it is all through the right channels and transparent. From what I can reason, I think it is better to do pension via salary sacrifice, because I think then the PRSI will be on the remaining income (after pension deduction), is this correct? Is there anything else that comes to mind, that I should be aware of?

2) How to choose a good financial advisor, or broker - what service is provided, and what are indications of quality in provision?

• Coming in cold to this (having only previously had a semi-public pension in the UK), I had thought that the broker/financial advisor, would have been someone advising on what funds are doing well and what are likely to do well in the coming years - taking a well informed view on the fund level decisions. Say someone with a strong background in perhaps economics or the like, or a good feel for the stock market. However I don't think this was the case with two brokers I have spoken with. So I am left wondering what the service is? - Is it servicing customer understanding on the risk-growth principles and the financial planning side to ensure that the right amount is tucked away given current finances, and striking the balance of having (taxed) money now, and having (lesser-taxed) money later? Is there another element of service beyond the financial planning side, i am not aware of?
• With this, how do you know if the broker/financial advisor is good value for the cut they need to make to keep their business going? What questions should I ask of a broker/financial advisor in terms of their service, or their performance?
• One of the brokers, shared that he was of a similar age and shared his personal investment performance on screen. His pension was about 90% invested in one single sector focused fund. I was quite surprised to see that, I had thought that conventional wisdom would be to have investment over a few funds, or at least fund that spanned several sectors. Would this be common practice for pension fund choices for a person in their early 40s? This, which I thought was an unconventional investment strategy, together with the impression that he was trying to recruit clients of a similar age, to replicate his approach, rather than service the customer - has left me somewhat suspicious. Please please left me know if my impressions of this are inappropriate or ill-founded???

3) How to choose a pension provider?

• I am trying to compare providers, say New Ireland, Zurich etc, and to get a general feel for their fund performance - but it is hard to know how much is eaten up by annual management charges. How do you compare net performance of different funds by different providers, over a 5+year span? [are there any websites, books etc you can recommend?]

3) standard and non-standard PRSAs?

I don't know if I am an out and out skeptic. The brokers I have spoken to are all in favour of non-standard PRSAs. I am wondering if there is more commission from non-standard, and whether the choice is actually worth it. I am thinking here of the Tesco superstore vs smaller supermarket Perhaps the same 10 'standard ' PRSA funds are frequently invested in, and that after allocation and annual management charges, they do comparably well to many many 'non-standard' PRSA funds that look good on paper but are infrequently used...? - any advance/experience would be really appreciated.

4) what if I go public sector in say 5 years?

From a bit of simulation modelling in spreadsheets, it seems that say a 98% allocation and 1%AMC, in general is comparable (& slightly more favourable) to a 100% allocation and 1.25%AMC if I have the same PRSA until retirement (say early/mid-60s). However if I enter the public sector, and stop the PRSA, it appears that 98% allocation and 1%AMC is much more favourable. So with this in mind, and settling into a new job in a new location with the family move, it seems that opting for lower AMC, at the cost of some allocation, might hedge my bets in terms of career options and managing retirement? But perhaps this is not important because I can transfer to the lower AMC PRSA if the event occurs? Though perhaps in practice there are ways in which the transfer is eaten up with fees/costs in one form or another? Any wisdom on this would be really appreciated?

5)Execute only vs broker/financial advisor

I am wondering what benefits of buying a PRSA through a broker/financial advisor is, compared to say signing up to an execute only service, and taking an automated allocation approach to fund management?

I am familiar with debates of active vs passive fund management in terms of stockmarkets, and that active works better for a few well managed funds, and the most funds do comparable to passive - or at least that was the case a few years ago; and so I wonder how this relates to pension funds and brokers vs execute only.

And just to be clear, I don't for one minute think I will become the equivalent of a 'day trader' in pension terms, I have young kids, and not much free time...so if I go execute only, it would be for a v. low maintenance approach and also in part to avoid the skewed perceptions of risk etc that the likes of Taleb discusses in his black swan book, and others else where.

Just to say that I really hope that I have not caused offence in by virtue of my own ignorance, and. my sincerest apologies if I have.

Many thanks.

You really are not a candidate for an execution only service - you don't know i) which product you want ii) which provider you want iii) which funds you want and iv) you need help with the technical aspects of pensions/prsas.

Salary sacrifice is a no no.

Brokers tend to leave the 'economics' to the fund managers.

Your fund choice is based on your risk profile, not the brokers.

There is no like-for-like fund/provider comparison website.

AMCs on Standard PRSAs are limited to 1%, not so on Non-Standard.

Low AMC is best.

Pick a fund/strategy based on your risk profile and stick with it.

creakingGate21

Hi,

Thank you SO much for you reply and advice, and for wadding through my post (I hadn't realised it was quite so long!).

I really appreciate your steer on my lack of suitability for execute only services, and your help and advice with all my other questions.

You mention to avoid salary sacrifice (something that is the norm in the UK) - I can I ask why that is? Or what is best? [The employer proposed a 9% employer contribution; 4% employee salary sacrifice - based taking the same approach as what they do for UK employees]

I think my only other question is how to identify a good pension advisor? (or indeed hallmarks of things to avoid)?

From what I can find on the internet (inc boards.ie) and what I can think of:

• does the pensions advisor have access to a range of different providers?
• Are there advisor incentives that may bias provider recommendations?
• how often does the advisor review if the current provider is value for money for the client (I.e. to advise if the client should switch)? And what does that review involve?
• years qualified experience?
• Fees involved.
• Is there anything else I should ask?

[One of the advisors I spoke to was employed by the provider - I'm guessing that is a bad idea now because they will only have access to products from that provider.]

Once again, thank you so much.

Henry Ford III

Some advisors will be tied agents. Their advice will be it's very nature be narrower and quite likely therefore compromised.

Others are multi agency. Better but they can't comment on providers they don't hold agencies with.

Best are authorised advisors. They can advise on any product or provider. The principle of best advise applies.

Expect to pay more for an authorised advisor.

https://www.boards.ie/discussion/comment/121312917#Comment_121312917

Central Bank - 2016

"The Handbook of Prudential Requirements for Investment Intermediaries (the 2014 Handbook) came into effect from 1 October 2014 and was imposed on all investment intermediaries under Section 14 of the Investment Intermediaries Act, 1995 (as amended) (IIA). All investment intermediaries must be familiar with the provisions contained in the 2014 Handbook. The definition of ‘Investment Intermediary’ in the 2014 Handbook effectively means that all Multi-Agency Intermediaries and Authorised Advisors have been re-classified as investment intermediaries."

Furze99

A view from the ditch i.e. that of a self employed person not expert in financial matters.

Had a PRSA account now for a good many years (Zurich in my case), a 1% management fee I believe.

My main considerations are, in order of priority

1) a means to minimise income tax at higher rate, so look annually at taxable income and make a contribution, subject to age limits, to PRSA to reduce income tax liability.

2) that the funds are managed by a reputable institution with assets to back it. Safety & security insofar as it can apply to investments.

3) that the PRSA fund should grow at least in line with inflation, if more then all the better.

After that, I don't worry too much and I suspect most people in similar position likewise. The primary goal is to save & minimise tax. Of course, the latter is really deferred tax to some extent as whatever is paid out after retirement will be subject to tax. Apart from 25% of fund which can be taken tax free.

Yes I could invest the money in property or in various higher reward schemes that I get details on from time to time. But just don't have the time or inclination for these. Know people inc parents who were burnt with these in the past.