Pension Advice

FX Meister

I've been thinking about setting up a pension for a while and have been to my AIB branch to discuss the details with an advisor there. I work quite a lot and don't have a lot of time to look around and find the best deal at the moment. I just want to ask peoples advice. Is there much of a difference between different banks as regards pensions? I'm looking at putting away €300 a month into a medium risk pension for now. Another option would be to use the €300 a month to increase my mortgage payments and pay my mortgage off sooner, would this be a better option? Obviously I wouldn't get any tax relief this way but I would be saving on a heap on interest payments. Any thoughts?

A Random Walk

Are you self employed? If not, do you have a company pension scheme?

You might want to have a read of something like Colm Rapples book before you set something up. There's a couple of options open to you, some of which will see you crucified with fees, some of which are not so bad.

You'll mostly hear people advising you to get your mortgage down to what you might consider a manageable level before contributing to a pension, personally I'm a believer in developing a saving habit so would probably want to start a pension anyway in that situation.

FX Meister

Not self employed and no company pension scheme. The AIB one has fees but I don't know how they compare to other pension schemes. I'm not too bad with my saving habits. I had an SSIA and now it's finished am putting a similar amount into a high yield savings account. I figure I'd rather put money into a pension for when I retire rather than have it in a savings account that I could spend the money from. Cheers for the reply.

Bujy79

You may be eligible to avail of the government incentive of putting up to€7,500 of your SSIA fund into a PRSA and receiving €2,500 from the govt on top of this.

Need to be earning less than 50k last year and be willing to invest the money for 1 year. Good incentive I believe to start a pension with.You will also receive exit tax back from your SSIA fund.

PRSAs also have max charges that apply to them.You can contribute as little as €25 a month to them too.

marathonic

AIB charge a fortune in charges for their products. I'm not sure whether you've been advised to go for a PRSA or a Personal Pension but in either case, you can do alot better than AIB.

Let's say you choose to go for a PRSA (which is what I've chosen as I feel they are more flexible and less costly). With AIB, you will be charged a 5% contribution charge and a 1% Annual Management Charge. If you go to http://www.labrokers.ie/LowCostPRSA.aspx you will be able to get a PRSA which will only charge you a maximum of 1% AMC (and no contribution charges).

What this means is that, if you are putting away €300 per month, AIB will charge you a €15 contribution charge per month. You will not have to pay that with any of the products through http://www.labrokers.ie/LowCostPRSA.aspx.

Basically, this will mean that an additional €180 per year will go into your pension fund and each €180 will grow in value along with the rest of your fund making a difference of thousands to the final value of your fund. The savings will be even greater if you decide to increase your contribution amount in the future. If you decide to contribute the €7,500 of your SSIA and avail of the €2,500 government top-up, your pension will begin with a €10,000 contribution and AIB will charge you €500 right away whilst the other products will not charge you.

The only thing is, they won't give you advice on which fund to pick (you'll have to pick a fund yourself). However, noone ,not even the top economists can, tell you which funds are going to perform best - if they could do this they'd be rich. Therefore, it shouldn't be too hard to pick a fund from the many available.

Personally, I like the funds from EagleStar, see https://www.eaglestarlife.ie/bgsi/servlet/DocArchServlet/public.pdf?docId=PN_PRSA_STD_BR_MATRIX_FUND_TABLE&docTag=&randint=3HB9&docType=.pdf

My shortlist was one of the top four on the page or the Dividend Growth fund. Your choice of fund will depend on what age you are - if you are young, the general consensus is that you should be going for the higher risk ones to give you the potential of higher returns.

Alot of Irish people are skeptical about investing in shares for no apparent reason (probably due to the Eircom fiasco). That's why alot of people went for deposit SSIA's as opposed to equity ones. When investing for a 5-year period or more, equities are generally the way to go. Research in the UK, for example, shows that negative five-year returns are very infrequent. 123 of the 131 rolling five-year periods from 1869 to 2004 have provided investors with a positive result.

Traffic

I took out a bank of Ireland PRSA late last year but now im thinking of switching to another institution as im not liking paying the 5% contribution fee.