Pension

05-03-2021 4:33pm

McGaggs wrote: »

I'd imagine advice would be cheaper than paying 5% and 1%.

Would still have to pay to find out whether or not it would be cheaper. Kinda arseways really.

Looking at that doc posted above and supposedly Irish Life have loads of products with lower rates. Yet when I asked the advisor the company set me up with he said all their products are 5%. So yeah, not sure where to go from there.

AndrewJRenko · 05-03-2021 6:05pm

[Deleted User] wrote: »

Would still have to pay to find out whether or not it would be cheaper. Kinda arseways really.

Looking at that doc posted above and supposedly Irish Life have loads of products with lower rates. Yet when I asked the advisor the company set me up with he said all their products are 5%. So yeah, not sure where to go from there.

Haggle. Find another broker (they're not really advisors). Try an execution only broker like LABROKERS.IE.

cooperguy · 05-03-2021 8:38pm

Deleted User wrote: »

The fees on pensions are pretty ****ing outrageous IMO.

Right now with interest rates at 0% and other things bubbling everywhere I would love an option to literally just put money aside and have zero risk. I don't want anyone to manage it. I don't want any service, I just want to put the money aside.

Standard fees seem to be 5% of contributions and 1% of total per year. Just did a little spreadsheet and assuming "low risk" returns of 3% it would take 5 years to break even on the fees. It's just another con job.

I pay a fraction of a percent in fees in total. I asked a while back for the fees on each of the funds I have access to and the attached fees are what I got

cooperguy · 05-03-2021 8:48pm

domrush wrote: »

Your final salary is irrelevant, all that matters is what you’ve put in.

If the final pot was 250k, you can take 25% of that as a tax free lump sum.

The remainder you can invest into an annuity or an ARF.

An annuity will pay you a guaranteed amount every year until you die based on interest rates at your time of purchase.

An ARF means your pot stays invested in assets such as bonds, equities or cash and you draw down the balance each year. If you left it in cash it would essentially be like a deposit account for you to draw from. Any withdrawals are liable to income tax and there is a minimum withdrawal rate.

Currently ARFs are significantly more attractive than annuities due to low interest rates.

All the pension calculators I have come across seem to predict your income in retirement assuming you buy an annuity with the pension fund.

Is there a good place that gives you a feel for taking the 25% lump sum and income from an ARF?

domrush · 05-03-2021 9:21pm

Deleted User wrote: »

Would still have to pay to find out whether or not it would be cheaper. Kinda arseways really.

Looking at that doc posted above and supposedly Irish Life have loads of products with lower rates. Yet when I asked the advisor the company set me up with he said all their products are 5%. So yeah, not sure where to go from there.

Do you mind if I ask when you were looking at these charges?

This rate of charge would not have been uncommon in the past, but would be considered very expensive nowadays. The industry has moved away from such high charges.

Also, it may be that the 5% was initial commission for the advisor. Prob not likely if your company set you up with the advisor, but there are some fairly unscrupulous advisors out there charging very high rates of commission from the customer’s pot.

Midlands2007 · 05-03-2021 11:38pm

McGaggs wrote: »

Whenever you meet the 12k a year guaranteed income, you can convert to an ARF

Thank you...that seems more doable than waiting until 75..Will be a small pension and would be happier knowing I could access my money from AMRF once I receive a state pension. If needed of course, would be great to think I will be still working up to 75...ðŸ˜

dublin49 · 06-03-2021 12:03am

what happens if the source of the separate 12K to achieve an ARF ceases,would your ability to drawn down from the ARF also stop.

Saudades · 06-03-2021 12:29am

Who pays the fees and charges on a company DC pension; Employee or Employer?

I always assumed I (employee) paid my own fees, but my statement has the 'administration charges' column blank.

Midlands2007 · 06-03-2021 1:30am

dublin49 wrote: »

what happens if the source of the separate 12K to achieve an ARF ceases,would your ability to drawn down from the ARF also stop.

I would imagine if state pensions decrease it would, I suppose you pay into pension now hoping same terms apply when retirement comes. I'm also assuming governments don't change conditions on PRSAs etc, like you can switch to arf once receiving state pension...who knows..no wonder lower income people wary of starting a pension and those who are older only having spare income to do it later than most....myself being one off them ðŸ˜€

domrush · 06-03-2021 12:04pm

Saudades wrote: »

Who pays the fees and charges on a company DC pension; Employee or Employer?

I always assumed I (employee) paid my own fees, but my statement has the 'administration charges' column blank.

The fees are taken through the management charge of the fund. Typically this is done by adjusting the daily price of a fund daily rather a direct charge from your pot.

So the employee pays the fees normally. The fees on DC schemes are typically very small, in the range of 0.2%-0.6% annually.

domrush · 06-03-2021 12:07pm

cooperguy wrote: »

All the pension calculators I have come across seem to predict your income in retirement assuming you buy an annuity with the pension fund.

Is there a good place that gives you a feel for taking the 25% lump sum and income from an ARF?

The returns on an ARF depend on the investment strategy you choose, the calculators typically can’t account for this choice.

Looking at a medium risk fund over the long term (15 years +) you could probably expect 3/4% return on average per year. This would generate a pension much larger than an annuity .

So when looking at pension calculators, the annuity pension outputted will tend to be much lower than what an ARF will return.

The J Stands for Jay · 06-03-2021 12:09pm

dublin49 wrote: »

what happens if the source of the separate 12K to achieve an ARF ceases,would your ability to drawn down from the ARF also stop.

The source of the 12k can't cease. It has to be from a guaranteed pension.

The J Stands for Jay · 06-03-2021 12:11pm

Saudades wrote: »

Who pays the fees and charges on a company DC pension; Employee or Employer?

I always assumed I (employee) paid my own fees, but my statement has the 'administration charges' column blank.

For my pension scheme, the fund management charges are taken from the fund, taken into account in the unit prices. For all the admin costs, Mercer send monthly invoices to the employer.

Tar.Aldarion · 06-03-2021 12:13pm

[Deleted User] wrote: »

The fees on pensions are pretty ****ing outrageous IMO.

Right now with interest rates at 0% and other things bubbling everywhere I would love an option to literally just put money aside and have zero risk. I don't want anyone to manage it. I don't want any service, I just want to put the money aside.

Standard fees seem to be 5% of contributions and 1% of total per year. Just did a little spreadsheet and assuming "low risk" returns of 3% it would take 5 years to break even on the fees. It's just another con job.

Afaik my pension fee is 0.65% per annum and that's it. If I change fund most are in the 0.65% to 1% range. I do far better than breaking even on the fees, the last 10 year return is 125%. People here have even lower fees than me, I guess BOI are just more expensive than them.

The J Stands for Jay · 06-03-2021 12:21pm

Bitconfused wrote: »

Thanks for the replies

So the contribution to the pension is not taxable? I presume if i set this up its just a monthly deduction that my employer matches? What happens if i leave the job is it transferred somewhere?

I don't know if this question was ever answered.

Your contributions are not taxable, but USC and prsi are still deducted. You can set it up as a monthly deduction through your payslip. The employer may match it (depends on your contract), bit not all employers do. If you leave the job within 2 years, the employer can take their contributions back (not all so, but they are allowed to); for your contributions, you can take them back, less 20%tax, or you can transfer to another pension (PRSA or your new employer's pension). If you leave after more than 2 years, you get to keep it all. You can either leave it invested in the current pension (but not make further contributions), or transfer it to a new pension.

cooperguy · 06-03-2021 1:40pm

Midlands2007 wrote: »

who knows..no wonder lower income people wary of starting a pension and those who are older only having spare income to do it later than most....myself being one off them ðŸ˜€

You're so far ahead by the time you account for the benefits already received (tax relief on the way in and employer matching) any changes are unlikely to make it a worse option than the alternatives

TK Lemon · 06-03-2021 4:09pm

My OH is 30. He pays 20% into his pension and his employer pays 10%. His fund is with Willis Towers Watson.

When he retires, does he buy his annuity from WTW or does he go elsewhere to buy the annuity? Is it possible to buy the annuity from them or are they just a mechanism
for saving and investing the fund.

When he looks at his statements (he’s been there almost 3 years) he’s never seen a deduction for fees. Are they taking a slice of the investments and giving him a portion of the profits? His funds have grown modestly overall.

Will WTW take a slice only if and when he goes to buy an annuity in 30+ years’ time?

The J Stands for Jay · 06-03-2021 4:29pm

TK Lemon wrote: »

My OH is 30. He pays 20% into his pension and his employer pays 10%. His fund is with Willis Towers Watson.

When he retires, does he buy his annuity from WTW or does he go elsewhere to buy the annuity? Is it possible to buy the annuity from them or are they just a mechanism
for saving and investing the fund.

When he looks at his statements (he’s been there almost 3 years) he’s never seen a deduction for fees. Are they taking a slice of the investments and giving him a portion of the profits? His funds have grown modestly overall.

Will WTW take a slice only if and when he goes to buy an annuity in 30+ years’ time?

You can buy an annuity (or A(M)RF) from whoever you want. WTW are likely billing his employer for administering the scheme, and then the investment manager will take a charge from the pension fund (this is taken into account in the unit price of the funds).

When buying an annuity, the annuity provider will pay commission to the advisor that brings them the business. An annuity without commission would have a better rate, but I think that retirement decisions are worth getting advice on and paying for that advice (either by way of commission or by paying them an hourly fee directly).

enfant terrible · 06-03-2021 8:08pm

dublin49 wrote: »

what happens if the source of the separate 12K to achieve an ARF ceases,would your ability to drawn down from the ARF also stop.

McGaggs wrote: »

I don't know if this question was ever answered.

Your contributions are not taxable, but USC and prsi are still deducted. You can set it up as a monthly deduction through your payslip. The employer may match it (depends on your contract), bit not all employers do. If you leave the job within 2 years, the employer can take their contributions back (not all so, but they are allowed to); for your contributions, you can take them back, less 20%tax, or you can transfer to another pension (PRSA or your new employer's pension). If you leave after more than 2 years, you get to keep it all. You can either leave it invested in the current pension (but not make further contributions), or transfer it to a new pension.

If you leave it in the current pension, then start a new job and new pension, are you then paying two sets of management fee's for the two pensions?

Would it not be a better idea to have all your funds in one pension so you pay one management fee?

Or is it worth splitting them to diversify your risk?

The J Stands for Jay · 06-03-2021 8:27pm

enfant terrible wrote: »

If you leave it in the current pension, then start a new job and new pension, are you then paying two sets of management fee's for the two pensions?

Would it not be a better idea to have all your funds in one pension so you pay one management fee?

Or is it worth splitting them to diversify your risk?

Charges are on a percentage of the fund, so it didn't make a difference, unless the new fund had a lower charge.

RedRochey · 06-03-2021 8:58pm

McGaggs wrote: »

I don't know if this question was ever answered.

Your contributions are not taxable, but USC and prsi are still deducted. You can set it up as a monthly deduction through your payslip. The employer may match it (depends on your contract), bit not all employers do. If you leave the job within 2 years, the employer can take their contributions back (not all so, but they are allowed to); for your contributions, you can take them back, less 20%tax, or you can transfer to another pension (PRSA or your new employer's pension). If you leave after more than 2 years, you get to keep it all. You can either leave it invested in the current pension (but not make further contributions), or transfer it to a new pension.

Just to add to this, I think you need to have been paying into the pension fund for 2 years, not just have been working 2 years

But also if you have a pension from a previous employer then you could transfer that into your current pension fund and that will count towards the 2 years of service

jcon1913 · 08-03-2021 4:18pm

McGaggs wrote: »

No, I've mis remembered. I'm paying 0% and 0.15%, and the fund is vanguard passive global equity through Mercer.

Hi, I'm not being smart but in a later post you say that the fund also gets paid by charging an adminstration charge to your employer - would a self-employed person face these too?

As an aside I think this is what drives people mad TBH - these layers of charges. 1% sounds like nothing until you realise that the pensions sales guys ( used to ) use 6% and 8% growth per annum as a good guide - so pension charges eat up to 14% of your projected gains every year.

Then you have the fund allocation - which is basically I give the pension fund €100 and if I don't get a 100% allocation, up to 5% disappears into charges. And that's probably before the sales guys commission.

When I want to sell these units there is another charge effectively by the spread on the unit - the difference between what a new guy coming pays in and what I get as an exiting owner of units.

The J Stands for Jay · 08-03-2021 7:04pm

jcon1913 wrote: »

Hi, I'm not being smart but in a later post you say that the fund also gets paid by charging an adminstration charge to your employer - would a self-employed person face these too?

As an aside I think this is what drives people mad TBH - these layers of charges. 1% sounds like nothing until you realise that the pensions sales guys ( used to ) use 6% and 8% growth per annum as a good guide - so pension charges eat up to 14% of your projected gains every year.

Then you have the fund allocation - which is basically I give the pension fund €100 and if I don't get a 100% allocation, up to 5% disappears into charges. And that's probably before the sales guys commission.

When I want to sell these units there is another charge effectively by the spread on the unit - the difference between what a new guy coming pays in and what I get as an exiting owner of units.

For a self employed pension (or an insured occupational scheme), those charges are built into the contribution charge and management charge. That's why they generally have higher charges.

The contribution charge covers the sales commission.

Spreads on units haven't been a thing since the 1990s. Although there could be some old pensions still out there with those charges.

The J Stands for Jay · 08-03-2021 7:08pm

jcon1913 wrote: »

Hi, I'm not being smart but in a later post you say that the fund also gets paid by charging an adminstration charge to your employer - would a self-employed person face these too?.

For a self employed pension, the contribution charge and the management charge have to cover issuing statements, complying with any changes to legislation or regulation, issuing leaving service options etc.

In larger occupational schemes, the management charge pays for the fund manager to invest the contributions. Whenever statements need to be issued, or a change needs to be made, the administrators will invoice the employer the cost of this.

butrasgali · 16-06-2021 1:41am

Hello,some advise needed please
I'm 51 and in the same factory job for 31 years.old pension plan switched over in 2013 to the needs plan.i have 7 grand a year from the old dB plan at retirement(65)..currently the new dc plan has 145k now and the end figure at 65 is 350k..I have maxed my pension plus 10 percent avcs..880 euro a month is being saved..is this a good pension or do I need to up the avcs .thanks

bilbot79 · 16-06-2021 1:55am

butrasgali wrote: »

Hello,some advise needed please
I'm 51 and in the same factory job for 31 years.old pension plan switched over in 2013 to the needs plan.i have 7 grand a year from the old dB plan at retirement(65)..currently the new dc plan has 145k now and the end figure at 65 is 350k..I have maxed my pension plus 10 percent avcs..880 euro a month is being saved..is this a good pension or do I need to up the avcs .thanks

It's hard for me to say but you'll have 7k for 3 years then 19k. The lump sum from the 350k plus whatever you do with the rest of it should keep you right. I think you're alright, nice to have the DB aswell. I'm aiming for a DC pot of 1.3mil at age 60. Currently 42, have 130k and maxed out on contributions. Total going in each month is 2257. Would probably take a big whack of it to buy me 7k a year though

butrasgali · 16-06-2021 5:01am

I'd like to retire at 60 as well..touch wood ,a redundancy package might come up around then..cheers for the info...you will have a nice monthly income on 1.3 million pot..

Bass Reeves · 16-06-2021 8:57am

butrasgali wrote: »

Hello,some advise needed please
I'm 51 and in the same factory job for 31 years.old pension plan switched over in 2013 to the needs plan.i have 7 grand a year from the old dB plan at retirement(65)..currently the new dc plan has 145k now and the end figure at 65 is 350k..I have maxed my pension plus 10 percent avcs..880 euro a month is being saved..is this a good pension or do I need to up the avcs .thanks

My figures will not be exact but just a rough guide.

The OAP at today's value is about 245/ week approximately or 12750/ year

You will have 7k or 134/ week from 65 from DD. I presume this will also give you a lump sum of 3X its value or 21k

Your DC is estimated at 350 assuming you take 25% of this as a lump sum that's 87.5k. this leaves 262.5k to be used to draw the test of your retirement income from.

What the OAP will be in 15+years or its structure is unknown. The pushing out of the age is suspended at present. But even if it pushed out and reached 68 by your retirement it is likely those that are over 65 will be allowed to draw non means tested unemployment until the. At the very least you will be allowed to draw them for 9 months.

At 65 your income will be 7kfrom DB+( minimum drawn down 4%DC) 10.5k (we will assume government allow retirees drawn jobseekers not means tested) 10.5k giving you a yearly income of 28k or about 550/ week.( That has to be taxed but tax approx 2k in today's terms ). When you qualify for the OAP your income will rise by about 40/ week or 2k/ year.

Even if they do not allow job seekers you can draw down more of your pension pot early. It would make sense to drawn some of this as in retirement income in the early stages when you can be more active than when you hit your eighties makes more sense.

Your lump sum would be in the order of 107k.

IMO your pit is capable along with the OAP of giving you an income of about 650/ week into you eighties. If it ran out at that stage( and I am not saying it will) you minimum pension when it runs out will be about 375/ week (OAP+DB). There are old people that age that save money from the OAP alone.

If I was you I consider paying a financial advisor to go over your figures but they look fairly ok to me.

My own opinion is people will reduce there working hours as they get older from now on not completely retire

butrasgali · 16-06-2021 1:25pm

Thanks,that's a great breakdown of my scenario..like the other chap above ..thanks for this..its definitely a mine field to look at from the outside ..as you say who knows what the future holds ,especially with the oap..that could be gone for anyone with a decent pension pot..

bilbot79 · 16-06-2021 2:37pm

I think it depends what lens you look through. Are you aiming to survive, or thrive? You're definitely safe if that's the aim

Pension

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