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British ISA vs PRSA vs SIPP.

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  • 07-10-2020 1:04pm
    #1
    JackieChang
    Registered Users Posts: 1,494 ✭✭✭


    ***investing / pension noob alert!***

    I was reading up on Davy's PRSA here: https://www.davyselect.ie/pensions/personal-retirement-savings-account-prsa.html

    It seems quite similar to the British ISA. Or am I mistaken? I can load up the account with cash, and trade away to my hearts content tax free. As long as I don't withdraw cash. Have I read it correctly?

    "Tax is paid once you reach retirement and start to draw down the pension benefits. Investment returns are tax free, and there is no capital gains tax when you sell your assets. "

    "... no income tax on dividends "

    I thought Ireland didn't have an ISA equivalent, but this seems like one. What's the catch?

    Can I "day trade" on the platform? For example, ride a Tesla explosion upwards, gain €2,000 then stick the profit into my boring "pension" stocks.

    I currently have about €6,000 in the stock market using the Trading 212 platform. Adding about €500 a month. Should I move over to one of these PRSAs?


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  • Options
    #2
    The J Stands for Jay
    Registered Users Posts: 5,650 ✭✭✭The J Stands for Jay


    JackieChang wrote: »
    ***investing / pension noob alert!***

    I was reading up on Davy's PRSA here: https://www.davyselect.ie/pensions/personal-retirement-savings-account-prsa.html

    It seems quite similar to the British ISA. Or am I mistaken? I can load up the account with cash, and trade away to my hearts content tax free. As long as I don't withdraw cash. Have I read it correctly?

    "Tax is paid once you reach retirement and start to draw down the pension benefits. Investment returns are tax free, and there is no capital gains tax when you sell your assets. "

    "... no income tax on dividends "

    I thought Ireland didn't have an ISA equivalent, but this seems like one. What's the catch?

    Can I "day trade" on the platform? For example, ride a Tesla explosion upwards, gain €2,000 then stick the profit into my boring "pension" stocks.

    I currently have about €6,000 in the stock market using the Trading 212 platform. Adding about €500 a month. Should I move over to one of these PRSAs?

    The PRSA is a pension product, so restrictions apply to how you can access the fund. The ISA is not a pension and has more relaxed rules about accessing the funds. There's more than just a PRSA that will let you lose your pension on Tesla.


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    #3
    colm_c
    Registered Users Posts: 2,030 ✭✭✭colm_c


    PRSA's as mentioned are a pension product.

    The idea is it is a tax efficient way to save for retirement.

    So for every 1 euro you put in, you get a tax credit for 40 cent (up to the contribution limit).

    Even better if you do it at source (i.e. from your salary every month), that way it only costs you 60 cent per euro.

    Now, you cannot access this cash until you retire, then it is taxed on withdrawal.

    I have the davy PRSA product, and it's nice, you can trade whatever stocks you like as well as funds.

    Day trading is not really possible, as it usually takes 2 days when you buy or sell something for it to happen. Maybe it's quicker if you call them. Day trading, you want to get in/out asap to maximise.

    I use it because I was not getting any decent returns in a managed PRSA, now it is in my control, and getting some decent returns from a mostly equity funds portfolio.


  • Options
    #4
    JackieChang
    Registered Users Posts: 1,494 ✭✭✭JackieChang


    colm_c wrote: »
    I have the davy PRSA product, and it's nice, you can trade whatever stocks you like as well as funds.

    How much do you pay in fees?

    Let's say I want to make four purchases a month in an ETF. What charges am I looking at. Commission and general handling fees from Davy.

    Also, you mentioned it takes up to two days to buy a share? As in, I see that Apple is cheap. I put an order to buy a share. It doesn't actually execute until two days later?! Quicker if you call them? Sounds like trading in the 1970s.


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    #5
    colm_c
    Registered Users Posts: 2,030 ✭✭✭colm_c


    JackieChang wrote: »
    How much do you pay in fees?

    Let's say I want to make four purchases a month in an ETF. What charges am I looking at. Commission and general handling fees from Davy.

    Also, you mentioned it takes up to two days to buy a share? As in, I see that Apple is cheap. I put an order to buy a share. It doesn't actually execute until two days later?! Quicker if you call them? Sounds like trading in the 1970s.

    Trading fees are zero.

    I think there are some exchange fees.

    There is a 0.5% annual management charge, no charges on contributions.

    It's a pension product, so usually it's buy and hold, so urgency is not as warranted.

    It's usually 2 days when I make a trade, but has been quicker.

    You can set a price, I.e good for today/friday/friday week.

    Give them a call if you want to ask them more detailed questions.


  • Options
    #6
    JackieChang
    Registered Users Posts: 1,494 ✭✭✭JackieChang


    colm_c wrote: »

    It's a pension product, so usually it's buy and hold, so urgency is not as warranted.

    Well that's what I'm doing in my Trading app at the moment. (Trading212)

    However I realize this is tax inefficient. I'm pumping money in that I've paid income tax on, whereas I if I use a PRSA I'll avoid that.

    I better give them a call.

    Can you tell me which product of theirs you're using? I'm guessing there are a few of them with fancy names. Davy Pro Plus. Davy Life Maxx Pro etc.


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    #7
    colm_c
    Registered Users Posts: 2,030 ✭✭✭colm_c


    This one: https://www.davyselect.ie/pensions/personal-retirement-savings-account-prsa.html

    PRSA (execution only).


  • Options
    #8
    Supercell
    Registered Users Posts: 15,322 ✭✭✭✭Supercell


    Can you use one of these alongside a regular work pension scheme? I currently have AVC payments on that too but am not maxing them out. My work pension is worth less than my contributions over the last 18 years..go figure, so I'd like to just put all AVC's into some ETF's which would (historically at least)likely wildly outperform my current work pension providers atrocious returns.

    Assuming the answer to the above is yes, anywhere i can find a list of equities they support investing in ?
    Also, the application form wants original copies of confirmation of address which is a royal PITA as literally everything these days is pdf, even my car and home insurance documents. Can I just print them off and send the hard copy instead?

    Sorry for all the questions, I cannot believe i didn't know this product existed in Ireland before and I'm quite excited about it!.
    https://www.loughlinstown.ie

    Have a weather station?, why not join the Ireland Weather Network - http://irelandweather.eu/



  • Options
    #9
    colm_c
    Registered Users Posts: 2,030 ✭✭✭colm_c


    Supercell wrote: »
    Can you use one of these alongside a regular work pension scheme? I currently have AVC payments on that too but am not maxing them out. My work pension is worth less than my contributions over the last 18 years..go figure, so I'd like to just put all AVC's into some ETF's which would (historically at least)likely wildly outperform my current work pension providers atrocious returns.

    Assuming the answer to the above is yes, anywhere i can find a list of equities they support investing in ?
    Also, the application form wants original copies of confirmation of address which is a royal PITA as literally everything these days is pdf, even my car and home insurance documents. Can I just print them off and send the hard copy instead?

    Sorry for all the questions, I cannot believe i didn't know this product existed in Ireland before and I'm quite excited about it!.

    Pretty sure you can, although give them a call, I think there is a regular PRSA and an AVC PRSA.


  • Options
    #10
    The J Stands for Jay
    Registered Users Posts: 5,650 ✭✭✭The J Stands for Jay


    Supercell wrote: »
    Can you use one of these alongside a regular work pension scheme? I currently have AVC payments on that too but am not maxing them out. My work pension is worth less than my contributions over the last 18 years..go figure, so I'd like to just put all AVC's into some ETF's which would (historically at least)likely wildly outperform my current work pension providers atrocious returns.

    Assuming the answer to the above is yes, anywhere i can find a list of equities they support investing in ?
    Also, the application form wants original copies of confirmation of address which is a royal PITA as literally everything these days is pdf, even my car and home insurance documents. Can I just print them off and send the hard copy instead?

    Sorry for all the questions, I cannot believe i didn't know this product existed in Ireland before and I'm quite excited about it!.

    PRSA AVC is what you're looking for. There are some restrictions on what you can invest in that other pension structures don't have, but ETFs are allowed.


  • Options
    #11
    Treppen
    Registered Users Posts: 4,555 ✭✭✭Treppen


    Are the gains on Davy PRSA subject to capital gains tax?


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  • Options
    #12
    JackieChang
    Registered Users Posts: 1,494 ✭✭✭JackieChang


    Supercell wrote: »
    My work pension is worth less than my contributions over the last 18 years..go figure

    Holy jaysus! How the hell did that happen. Did they invest in coal or something for you?

    Do you have any idea what your money was invested in?

    Treppen wrote: »
    Are the gains on Davy PRSA subject to capital gains tax?

    From the link posted above: "Investment returns are tax free, and there is no capital gains tax when you sell your assets"


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    #13
    JackieChang
    Registered Users Posts: 1,494 ✭✭✭JackieChang


    By the way what is the "punishment" for withdrawing your funds before you retire?

    Let's say you somehow reach €5 million in returns when you're 45 years old and you're happy with that. How much of a hit would I take to withdraw it all?


  • Options
    #14
    The J Stands for Jay
    Registered Users Posts: 5,650 ✭✭✭The J Stands for Jay


    JackieChang wrote: »
    By the way what is the "punishment" for withdrawing your funds before you retire?

    Let's say you somehow reach €5 million in returns when you're 45 years old and you're happy with that. How much of a hit would I take to withdraw it all?

    You can't withdraw it early, unless you're dying and Revenue say you can withdraw it.

    You can get it from age 50, but you have to leave the job that the contributions relate to.


  • Options
    #15
    colm_c
    Registered Users Posts: 2,030 ✭✭✭colm_c


    McGaggs wrote: »
    You can't withdraw it early, unless you're dying and Revenue say you can withdraw it.

    You can get it from age 50, but you have to leave the job that the contributions relate to.

    Yep, this.

    And there are more taxes to pay if you go above the 2 million threshold.

    https://www.citizensinformation.ie/en/money_and_tax/personal_finance/pensions/personal_pensions.html#:~:text=The%20Finance%20Act%202006%20introduced,has%20been%20%E2%82%AC2%20million.


  • Options
    #16
    JackieChang
    Registered Users Posts: 1,494 ✭✭✭JackieChang


    McGaggs wrote: »
    You can't withdraw it early, unless you're dying and Revenue say you can withdraw it.

    You can get it from age 50, but you have to leave the job that the contributions relate to.

    That's a bit of a dose. I'd like to be able to have it available in case of emergency. Yes I already have emergency funds. But they are for keeping me and only me fed, watered and sheltered on dole levels for about half a year. (I have no kids or dependents)

    What job does the contribution relate to if I'm just topping it up from my bank account every couple of weeks? Does it have to be linked to a job to get the tax break?


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    #17
    colm_c
    Registered Users Posts: 2,030 ✭✭✭colm_c


    JackieChang wrote: »
    That's a bit of a dose. I'd like to be able to have it available in case of emergency. Yes I already have emergency funds. But they are for keeping me and only me fed, watered and sheltered on dole levels for about half a year. (I have no kids or dependents)

    What job does the contribution relate to if I'm just topping it up from my bank account every couple of weeks? Does it have to be linked to a job to get the tax break?

    It's not an emergency fund, it's a pension.

    If you need to dip into a pension fund, then your emergency fund is not big enough IMO.

    You get a cert from the provider for every contribution you make, you then add this to your tax credits on revenue.ie

    Your job will then get notified and update your tax credits based on this change.

    It's much less messy just to have your work direct it to the PRSA.


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