Self directed pension plans

rocky

Hi, I'd like to have more control over where my pension money is invested, I found online that Zurich seems to offer something like this

https://www.zurich.ie/pensions-retirement/choosing-your-pension/self-directed-pension-plan/

Any other recommendations?

Thanks.

coylemj

Trying to second guess market trends and movements is a recipe for disaster. That's what Zurich mean when they advise prospective customers that that scheme 'should be considered a high-risk investment.' They also point out that it is aimed at 'experienced investors'.

If you're more than 10 years off retirement, put your money in a managed fund and leave the day to day investment decisions to the professionals.

cnocbui

https://www.boards.ie/discussion/comment/121623006#Comment_121623006

Australia has self managed superannuation as an option and they now comprise almost a third of the funds invested (AU$869 billion) and over a million Australians manage their own funds. One reason they went in this direction was the outrageous fees 'professionals' were charging. They even run education courses for people who want that.

The performance of the self managed funds has been found to be on par, or better, than professionaly managed funds.

Jim2007

https://www.boards.ie/discussion/comment/121623117#Comment_121623117

I spent over three decades in the financial services sector and in my experience most people who make their own investing decisions are lucky if they end up with the amount they put in in the end. So I'd be very interested in see the reference material you have for that last statement.

cnocbui

https://www.boards.ie/discussion/comment/121623326#Comment_121623326

https://www.smsfassociation.com/smsf-performance

And this in particular:

To conduct this annual research, the SMSF Association has once again engaged the University of Adelaide to examine the overall financial performance of self-managed super funds (SMSFs) compared to APRA-regulated funds.

This research contributes to the existing evidence on the strong financial performance of the SMSF sector.

It extends the research completed by the University of Adelaide for the 2017–19 period, and again shows SMSFs perform on par with, or better than, APRA funds in some financial years.

The taxation system in this country is not conducive to the evolution of financial sophistication. I am not surprised at your having doubts.

Jim2007

https://www.boards.ie/discussion/comment/121623513#Comment_121623513

Well this seems to be sponsored research off the back of independent research... and what it finds is that it may be on a par with managed funds... But that is nothing to write home about as Australian funds do not perform particularly well. Their conversation rates are around 4% where as Swiss supervised and managed funds have a conversion rate of around 6.8%.

And to correct a couple of things, I did not say I have doubts and I have no worked in the Irish financial services sector and am not subject to the Irish tax system. As for financial sophistication, that has very little to do with poor performance on the part of individual investors. Mentality plays a major part as does poor portfolio construction combined with a lack of knowledge and data hindering accurate performance and attribution analysis.

coylemj

The performance of the self managed funds has been found to be on par, or better, than professionaly managed funds.

So this is a win-win situation with no losers. That's efffectively what you're saying.

Meaning that nobody who administered his or her own fund ...

1. Panicked on a crash or blip in the markets, moved all of their money into cash or other conservative funds and missed the rebound?

2. Decided to ride a boom in commercial property and got badly burned when the market dipped? Worse, property funds got frozen with no withdrawals allowed (has happened here) and the investors couldn't move their money into safer funds.

Research that is paid for by an interested party is not worth the paper it's written on.

cnocbui

https://www.boards.ie/discussion/comment/121623699#Comment_121623699

I am not familiar with Swiss pension funds. Upon the death of the pension owner, is the principle returned to the beneficiaries of their estate tax free, as would be the case with an Australian SMSF that 'only' manages 4%?

cnocbui

https://www.boards.ie/discussion/comment/121624053#Comment_121624053

"Research that is paid for by an interested party is not worth the paper it's written on."

That must make two of us who avoid taking drugs made by pharmaceutical companies, then.

Furze99

https://www.boards.ie/discussion/comment/121624439#Comment_121624439

Touche!

rocky

So... If there are no other options suggested, I'll call Zurich tomorrow to find out more details

coylemj

https://www.boards.ie/discussion/comment/121624439#Comment_121624439

Before they can be unleashed on the general public, drugs have to be approved by state regulatory bodies (the FDA in the US), not by the pharmaceutical companies which developed them.

Completely barmy comparison.

cnocbui

https://www.boards.ie/discussion/comment/121625176#Comment_121625176

The Pharmaceutical companies pay for the clinical trials of their products and it's therefore paid research by a beneficiary, and it's that paid research which the regulatory bodies rely on when making their determinations.

The other major funders of biomedical research are the for-profit pharmaceutical, biotechnology, and medical equipment industries, which have outspent NIH in recent years. The Pharmaceutical Research and Manufacturers of America (PhRMA) reported that in 2003 its member companies (which include most of the large biotechnology companies as well as all the major pharmaceutical companies) spent $27.4 billion on R&D performed in the United States and another $5.8 billion on R&D performed abroad (PhRMA, 2004).

The system relies on the assumed academic integrity of the researchers. You believe that the Adelaide University researchers integrity was compromised by being paid, so careful what pills you swallow.

FlipFlopAgain

https://www.boards.ie/discussion/comment/121624914#Comment_121624914

Aviva offer something similar, called SDIO.

Considering how many managed pension plans for people close to retirement lost significant money recently by having a large portion of the portfolios invested in zero interest bonds, which tanked once the ECB/Fed started raising rates, it is IMHO legitimate for a customer to look for alternatives.

The J Stands for Jay

https://www.boards.ie/discussion/comment/121623326#Comment_121623326

Many years ago, I saw people who went 33% AIB, 33% Bank of Ireland, 33% Anglo, and various other 'investments' that seemed to be based off nothing more than a couple of newspaper headlines or the fact that they liked the company's product

The J Stands for Jay

https://www.boards.ie/discussion/comment/121624914#Comment_121624914

There's other providers who offer this service, not just Zurich. You'll need to look at the cost, service levels and access to market you want to play with

AndrewJRenko

https://www.boards.ie/discussion/comment/121627367#Comment_121627367

Was it Gay Byrne or Pat Kenny who told how the 'best' financial advisors were telling them to put everything into Irish financial shares?

Padre_Pio

https://www.boards.ie/discussion/comment/121627367#Comment_121627367

Heard of a fellow who worked for Tullow Oil and had 300k invested with them in 2019. Lost his job and his hole in 2020.

Putting money in individual stocks is only for those who are constantly monitoring their investments.

Jim2007

https://www.boards.ie/discussion/comment/121627675#Comment_121627675

I think Brendan Burgess was on TV on one occasion telling people to fill their boots up with them! A big part of the problem is that people take advice targeted at large economic blocks like the US or Euroland and apply it to Ireland ignoring all the basic difference between say Euroland and small economy on the edge of Europe. The Irish banks were and still are basically building societies and when you invest in them you are investing in the property sector and there should be no surprise at all that you will get wiped out when things go south in that sector. Especially if you ignore the practice of keeping property and like asset classes at a round 6% or 7% of the portfolio.

Investors in Ireland need to appreciate they live in Euroland when it comes to making investing decisions. And the means that when you apply the general tenants of investing to your portfolio you won't end up with many Irish stocks in play because they are basically the "penny stocks" of Euroland.

The J Stands for Jay

https://www.boards.ie/discussion/comment/121627675#Comment_121627675

I think both of them had ridiculously bad investments

The J Stands for Jay

https://www.boards.ie/discussion/comment/121627807#Comment_121627807

To give a flavour for Irish investing, most pension providers no longer offer Irish equity funds due to the small range of available investments.

FlipFlopAgain

It was very common up until the GFC for Irish people to have a lot of money in bank shares. I know of one person whose parents' pension was wiped out in the crash because of this. I know of a solicitor acting for a client who sold a large amount of land in the mid 2000's. The solicitor took advice on what the client should do with the money, and the advice he got (I forget from whom) was to put it all in bank shares. Fortunately, in this case, the solicitor didn't trust the advice and left the money on deposit instead.

I pointed out earlier that there are options for self directed pension funds, and there are legitimate reasons for using them. But since I'm at least 9 years from retirement (and probably realistically 15 years from retirement), I'm happy to leave most of my own money in an MSCI World Index tracker fund. I've a small bit in a Euro tracker index and a small bit in a default fund from the pension provider. When I get closer to retirement, I may wish to have more flexibility.

richardbradley

To actually answer the question for you, yes there are other providers - most of the big brokers - e.g. DAVY will allow you to set up a personal PRSA account - I think the charge is 0.75%pa with Davy -then the account allows you to pay into it during the year and buy and sell whatever investments within it you would like very similar to a regular trading account.

The thread seems to have digressed into whether or not its a good idea. That depends on how you invest - if you do you research and pick the right balance of low cost market tracking funds with the right exposure to the right sectors and parts of the globe, and rebalance regularly, hold your nerve on market dips etc then you can achieve what you want - the problem many here are highlighting is that for most people they can't actually do this and they end up spending more time over it and making less money.

AndrewJRenko

https://www.boards.ie/discussion/comment/121628190#Comment_121628190

What would you gain over having a professional fund manager, someone who actually knows their stuff and is paid to do this stuff, managing the fund for you - diversifying, rebalancing, holding their nerve and more?

Jim2007

https://www.boards.ie/discussion/comment/121627884#Comment_121627884

My biggest problem with Irish funds providers is the lack of any reliable performance and attribution reporting. I challenged one advisor about this recently and he went round and round circles neither told us how or if he did any kind of research on the funds....

Jim2007

https://www.boards.ie/discussion/comment/121628293#Comment_121628293

I can teach anyone the how part, but I can't give them the nerve to actually execute it. And there in lies the biggest disadvantage of managing your own money. Most people will not have a problem coming up with a list of good companies to invest in, fewer will have the skills to identify a good price to buy at and even fewer will have the nerve to hold on and double down when the going gets tough.

And it is the same for fund managers, they don't do nearly as well when they are managing their own money. From my peer group (all retired now), I'd say we did about 2% less on annualised basis over say a 30 year period.

Jim2007

https://www.boards.ie/discussion/comment/121628190#Comment_121628190

Well we do cover pensions on this forum and this kind of stuff is not really addressed else where. So as long as we don't venture into stock picking etc.... I'm happy to let it continue until it runs it's course.

The J Stands for Jay

https://www.boards.ie/discussion/comment/121628559#Comment_121628559

Irish pension fund managers have a tendency to not stray far from the benchmark; underperformance is feared more than they desire outperformance. All of which essentially means active costs for passive performance.

Jim2007

https://www.boards.ie/discussion/comment/121628753#Comment_121628753

Where are you finding this information on the benchmarks? Because last time around the advisor I challenged came up with nada....

The J Stands for Jay

https://www.boards.ie/discussion/comment/121629907#Comment_121629907

It was from an article a few years ago. I don't remember which newspaper it was in, and it's proving difficult to Google.

AndrewJRenko

Somebody used to produce quarterly reports showing the 3/5/10 year returns on all the pension funds sold here. Finfacts.ie used to archive these.

Is this a thing of the past?

The J Stands for Jay

https://www.boards.ie/discussion/comment/121630176#Comment_121630176

Possibly a thing of the oast. The number of funds has exploded on recent years, and these reports always focused just on the Managed fund from each provider which is less popular than previously. I did see one for last year, but whoever produced it had chosen a different type of fund from each provider and was trying to use it to determine which provider was best.

I'd always found the notion of comparing these laughable. It doesn't provide any information that would enable anyone to make any decision.

amacca

How about the notion of going self directed but purchase something like the MSCI world index within the self directed product

Is there a best of both worlds is what I'm asking I suppose

Low fees of execution only type self directed option....diversification of index/tracker funds....maybe vanguard/sp500/world index mix (albeit with the risk of you not doing research, not holding nerve/making a bad decision etc)

Any merit in that or can you get similarly low fees for a managed version of above?

(Also...on a somewhat unrelated note but out of interest is it true if you select a lifestyling strategy on a managed fund and then layer decide I want out you can't opt back in to lifestyling due for actuarial reasons...fees based on risk over term or something slong those lines..you mess it up if you are chopping and changing)

Jim2007

https://www.boards.ie/discussion/comment/121630034#Comment_121630034

That is pretty well useless because it tells you nothing about the funds beyond what the journalist was told. I have yet to see any type of fact sheet or other document where a properly defined benchmark versus the performance of a fund.

Jim2007

https://www.boards.ie/discussion/comment/121630316#Comment_121630316

Asset allocation and portfolio construction are the biggest contributing factors to a good outcome over time in managing your own pension fund. And I can't see myself every putting the MSCI world index into a portfolio, other ETF yes, but not something as generic as that. And the constituents of the portfolio would change overtime as you get older.

Also, it is probably worth pointing out that a portfolio constructed of index funds would represent it's benchmark and the fees there on would represent the base line for consider if it is worth paying for better performance or not.

amacca

https://www.boards.ie/discussion/comment/121630774#Comment_121630774

But given that so few fund managers do better than an index over the longterm (if that is correct?- its what I seem to keep encountering) how do you choose with any degree of confidence a manager/management company etc you think might be worth paying an additional fee to

AndrewJRenko

https://www.boards.ie/discussion/comment/121630265#Comment_121630265

Were the funds not compared on a comparable basis, returns net of all fees and charges?

The J Stands for Jay

https://www.boards.ie/discussion/comment/121631240#Comment_121631240

Would you compare a Zurich emerging equity fund against an Aviva European equity fund and decide that means Aviva is a better fund manager?

AndrewJRenko

If you get a better return out of it, then yes, it is a better fund.

Jim2007

https://www.boards.ie/discussion/comment/121631307#Comment_121631307

No that would be just nonsense as you'd be comparing apples to oranges on many different levels. You evaluate the capabilities of the fund manager based on their performance against the benchmark for that fund and nothing else. Some of the obvious reasons for this include the asset allocations, the geographic spread, the type of instruments used and if there is a need to use synthetics. Less obvious would be things like the size of the float, rules on application of new funds, FX cover rules, the policies of the individual funds and so on.

First you construct your portfolio and then you choose instruments to use in each asset class based on comparing like with like with that asset class. And if you want to up your game yo might construct a benchmark and track your performance against it.

AndrewJRenko

https://www.boards.ie/discussion/comment/121627867#Comment_121627867

I think Gay had the indignity of being ripped off by not one but two separate financial advisors. To paraphrase the bould Oscar:

“To lose one parentfortune, Mr. Worthing, may be regarded as a misfortune; to lose both looks like carelessness.”

Henry Ford III

https://www.boards.ie/discussion/comment/121633901#Comment_121633901

https://www.irishtimes.com/culture/gay-byrne-i-am-no-different-to-hundreds-of-thousands-of-people-who-lost-money-1.4072183#:~:text=Embezzled%20of%20more%20than%20%E2%82%AC,banking%20crisis%20and%20property%20crash.

The first time was a plain theft by his accountant.

The 2nd time was as a result of very high risk investments (Property) and a total lack of diversification.

Self invested pensions are not for everyone. In my experience I'd say they might suit maybe 5% of the population who have sufficient knowledge to run one. They aren't cheap either.

Setting up a self invested pension to invest in index trackers makes no sense at all.

JVince

A hybrid version is looking at all the funds of a provider and choosing a mix to suit.

They usually allow switching between funds without penalty.

Here's Zurich list https://www.zurich.ie/funds/fund-price-calculator/

I currently am invested in a mix of 5 with my highest weighting being Toptech100

Previously my pension guy steered me towards the prisma funds and 100% was in prisma 4 &5. I still have some in prisma 5, but like the diversity of my current mix

amacca

https://www.boards.ie/discussion/comment/121633983#Comment_121633983

Could you explain why in a bit more detail?

I was under the impression self directed/execution only was cheaper?

Less management fees etc...more of your funds invested less fees as there is less management?

I ...perhaps naively thought it wouldn't be a bad option to use a prsa/avc as a vehicle to purchase a mix of one or a number of index trackers and benefit from the diversification without deemed disposal + the tax relief at the high rate

So is something like Zurich and prisma funds a better option?

The J Stands for Jay

https://www.boards.ie/discussion/comment/121651271#Comment_121651271

Small self administered pensions are more expensive because there's more management, and no economies of scale.

Self directed is more expensive as you have to pay for the pension product and then the index tracker which is a separate product. There may also be stockbroking charges.

Execution only means you aren't getting advice. It can be cheaper since you aren't paying for the advice.

You can get index trackers through the PRSA companies without messing around with self directed. Standard life, for example, have Vanguard funds.

amacca

https://www.boards.ie/discussion/comment/121656276#Comment_121656276

Thank you. I appreciate the info.

rocky

This is what Davy are saying, probably best to talk to a broker? They seem to have a 1% annual charge

"Under Pensions Legislation there is a requirement for a Certificate of Benefit Comparison for transferring to a PRSA.

We can put you in touch with an independent provider that can arrange this. However, the cost of obtaining the certificate is 1% of the value of your pension + VAT and must be covered by you.

As an alternative option, you could set up a Davy Personal Retirement Bond (PRB) to accept the transfer. There is no requirement for a Certificate of Benefit Comparison for transferring an Occupational Pension Scheme to a PRB. The Davy PRB annual charge is 0.90% (PRSA is 0.75%). The other charges incurred on both the PRSA and the PRB are the same. If you are trading outside of the UK/Ireland overseas and custody charges are applicable (minimum of 0.06% of the value of the trade plus €25).

However I should make you aware that our fees are due to increase in the next few months. The PRSA account fee will increase to 1% per annum and a new minimum account fee of €1k per annum will apply to PRB accounts."

cnocbui

Were it me, I'd tell them to stick that. 1%!!!

It's outrageous 'professional' fees charged just to pick ETFs that fuelled the large swing to self managed super in Australia.

rocky

https://www.boards.ie/discussion/comment/121728451#Comment_121728451

They are not even picking the ETFs, it's a self directed pension I'm looking for.

FlipFlopAgain

https://www.boards.ie/discussion/comment/121727956#Comment_121727956

Are you transferring from an occupational pension scheme to a PRSA?

If so, then it's the law that you need to get the assessment done to get the certificate.

Also, if so, you might be better transferring it to a personal retirement bond (PRB), assuming that you are no longer employed by the company that gave you the occupational pension. You won't be able to contribute any more to the PRB, but you should have flexibility as to what funds its invested in.

You can then take out a brand new PRSA for your new job.

rocky

https://www.boards.ie/discussion/comment/121746898#Comment_121746898

Yes to all of the above.

Anyone any other suggestions on PRBs with lower than 1% annual charges?