Self directed pension plans

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?

FlipFlopAgain

The AMC can depend on the fund you're invested in. I've a PRB with Aviva invested in a Global Equity ESG Passive Fund, which basically tracks the MSCI world index. The AMC is 0.7%. If you go for their SDIO option, which allows you to choose your own investments, I think the AMC is higher. You really just have to ring around either directly to the companies (if they take direct business) or to the brokers to see what AMC you can get.

rocky

Person in Zurich I talked to said the PRB is not self directed, and would be around 1% annual charge.

So far, Davy seems the best one, even with the high charge, because they allow me to choose individual stocks, not ESG crap funds that are going out of fashion anyway 😀

Trigger Happy

https://www.boards.ie/discussion/comment/121646506#Comment_121646506

The top tech 100 had a great year last year. But yeah, a mix of funds focusing on different geographies and sectors is wise. Never have too many eggs in one basket.

Jim2007

https://www.boards.ie/discussion/comment/121761361#Comment_121761361

Nobody is going to give you this stuff for free, you always pay in some form or another. The real question is are you going to be able to outperform the pension fund managers while paying that fee?

Henry Ford III

https://www.boards.ie/discussion/comment/121761361#Comment_121761361

How did you arrive at that conclusion?

cnocbui

I don't have a pension, I simply invest directly, so it's self directed with no fees other than those necessary to make or divest individual investments.

Of course it doesn't have the tax benefits of a pension, but my investment strategy is near solely focused on the benefit being dispensed via dividends rather than a lump sum cash out based on capital gains.

Jim2007

https://www.boards.ie/discussion/comment/121766789#Comment_121766789

Are you actually doing performance and attribution analysis on your performance? And just as important do you have the data and the skills to do it?

cnocbui

https://www.boards.ie/discussion/comment/121768732#Comment_121768732

I am unfamilliar with your jargon. For 2022 I was getting a dividend return on assets of 4.1% and a capital appreciation of 6.07%, so an annual return of 10.17% In contrast, I do have a small sum in professionally managed cumpulsory super from a previous employment which managed a return of 2.37% in capital appreciation, returned no dividend, and then the pro's gobbled about 25% of that gain in fees.

All this is leaving out the BTC, which would distort everything too much.

rocky

https://www.boards.ie/discussion/comment/121766330#Comment_121766330

I can invest in the QQQ myself, don't need any managers for that. And I probably have the option of selling and holding cash when I think a downturn is coming.

https://www.boards.ie/discussion/comment/121766715#Comment_121766715

Which one, about ESG? Well, it seems to be pushed back a bit in recent months, even BTC is now greenwashed as not that bad, since Blackrock are promoting it and they like money.

Hence 9 new btc ETFs.

Jim2007

https://www.boards.ie/discussion/comment/121769392#Comment_121769392

It it is not jargon, it is the rules and calculations underlying how the 2.37% is actually measured. And done correctly your comparative return would not be remotely close to 10.1%. The fact that you can’t actually measure your performance means you don’t know how you are doing versus how well you could or should be doing. And on top of this by opting out of the pension framework you are leaving a chunk of the return on the table each year.

You might be one of the very few individuals capable of consistently out performing the pension fund over a thirty to forty year period, but I would not be willing to bet my financial well being on it.