Private pension is 5% contribution rate too high

deepsea123

I want to put money into a pension. I was quoted 5% contribution rate. Is that high?

If so how do I get a better rate.

Thanks

walshtipp

https://www.boards.ie/discussion/2058417867/private-pension-is-5-contribution-rate-too-high

5% is often the minimum contribution amount. The amount that you can contribute while still qualifying for tax relief is based on your age, see below. These figures are independent of any employer contribution

Age	Percentage limit
Under 30	15%
30-39	20%
40-49	25%
50-54	30%
55-59	35%
60 or over	40%

If you want to increase your contribution, you will need to contact your pension administrator. Often an online portal is available to make contribution changes.

Mrs OBumble

Is that a contribution rate, or the fee you will be charged?

To get lower fees, get quotes from different brokers.

JPup

Is this a work scheme? A 5% contribution rate may be matched by an equal or higher amount by your employer, in which case it's generally a good deal to sign up.

Any fees being paid would be a separate matter.

SuperBowserWorld

If that's a 5% management fee then run away. Far too high.

deepsea123

No it's a 1% management fee , just 5% of what I pay in I have to pay as fee. 95% goes in my fund

SuperBowserWorld

That seems very poor, especially if it's defined contribution.

Here's a "Zurich PRSA" example I googled. I'm not affiliated with Zurich, just an example.

"Actual Allocation 100%

Annual management charge 0.75%"

deepsea123

Thank you

Geuze

https://www.boards.ie/discussion/comment/123579303#Comment_123579303

Very bad value.

Look for 100% allocation, i.e. zero montly contribution charge, and a low AMC.

Jim2007

https://www.boards.ie/discussion/2058417867/private-pension-is-5-contribution-rate-too-high

It's very difficult to give a useful answer to such a random question with no background information….

My experience is in mainland European pensions, not Irish pensions. But generally speaking 5% for people in the 25 to 35 age bracket is the legally mandated employee contribution in countries that have already implemented the "Second Pillar" of the typical EU system that Ireland is moving towards, although very slowly.

The idea behind it is that a typical citizen should be able to live confortably in retirement if they follow this contribution plan. But there are a lot of assumptions behind it:

• First of all that you will qualify for a full state pension
• Your employer will make matching contributions
• There are no fees or they are covered by the employer
• The contribution scale will reach a rate in the high 20s by your late 50s

So speaking about someone in their late 20s early 30s this product is probably not to be recommended it is too expensive if you are paying a fee of 1% and there is a very hight chance that your pension will be under funded going forward.

Again generally speaking it is better to load up on contributions in the early years and let time work it's magic rather than having to make very substantial contributions later in life.

Henry Ford III

Anyone suggesting a pension arrangement these days with that sort of charging structure are best avoided.

You should be looking for 100% net allocation with a reasonable amc.

Ask the advisor how many different insurers/products they looked at.

p.s. Is there an employers contribution also?

Gettin Auld

I work for Tesco, and I put 8% into my pension with new Ireland Assurance, Tesco match up to 7.5% (They have little things in the small print, like let’s say a standard work hour is coded as 1, but an overtime hour is coded as 2, they will not consider the ‘coded 2’ hours as hours worked in regards to pension contributions so they don’t actually match it to 7.5% in almost all cases. But there’s still 80-100 a week going into my pension). And the additional .5% I pay are voluntary, I can adjust my contributions weekly and lately I’ve been putting more into my pension, paying less tax and my take home money is pretty much staying the same. So I’m looking for the sweet spot to where instead of paying more tax I’ll be getting more money in my later years. It ALMOST feels like a pay rise that I control. (I have removed something I wrote with an edit as I said something that I misunderstood, and another user promoted me to double check and I see that I am indeed wrong)

So my answer to the question, any contributon is only high if affects your disposable income or interferes with debt repayments. Putting away €1 now to get back €2+ when you’re older seems like a good thing to me.

notAMember

OP, I find your question a little confusing. Are you talking about contribution rate - which means the % of your salary, or fees?

They are two very different things, but you seem to be using one term to mean the other?

coylemj

https://www.boards.ie/discussion/comment/123608637#Comment_123608637

1.5% p.a. is a very low return. If you are more than 10 years from retirement, I would seriously look at getting your money into a more aggressively managed fund. By which I mean a fund that has a lot more equity (ordinary share) content. As you approach retirement, you can start to progressively move your money into more conservatively managed funds.

Zurich Prisma 4 is currently quoting an annualised return of 7.7% p.a. over the past 5 years, 5.3% p.a. over the past 10 years. That's the kind of fund you should have your money in.

To illustrate the effect of compounding: If you put 1,000 into your fund ten years ago at 1.5% p.a., that contribution would today be worth 1,161. A rate of 5.3% p.a. over the same 10 years would yield 1,676 - a 44.4% better return.

Gettin Auld

https://www.boards.ie/discussion/comment/123609000#Comment_123609000

I’m still only learning, it’s only this year that I’ve been able to start gaining controls of money and only this year that I actually have disposable income, I’ve been the sole earner for several years due to health complications with my wife, but it’s only now that she’s back to work. I was managing all of our debt, mortgage, two cars, three kids and so on; on my own. So I’m new to having money in my pockets. I’m here to learn and to listen.

In my pension fund information I do have the option to change where my pension money is invested or kept. I do not understand enough yet to try move things around.

Gettin Auld

https://www.boards.ie/discussion/comment/123609000#Comment_123609000

You prompted me to double check what I said, and I was indeed very wrong. My pension says “Annualised YTD;0.9%, 1YR 6.22%, 3YRS (p.a.) 10.5%, 5YRS (p.a.) 8.6%” and double checking money that me and my employer have put in (€7744) there is total for me right now of €9045.

I was looking at the line of a previous report that said “1MTH 1.3%”.

As I said, I am still only learning and always open to correction and education.

coylemj

https://www.boards.ie/discussion/comment/123609427#Comment_123609427

Those numbers are close to Zurich Prisma 5 whch is 72% invested in equities.

Based on those numbers, I'd say you are in the correct type of fund if you are more than 10 years off retirement.