Starting a pension at 30

RedXIV

Augeo wrote: »

This is a very good starting (or even finishing spot once who allow for being Ireland EU based and not US)

Been reading it since keane2097 very kindly posted the link previously More research for tonight!

Merowig

RedXIV wrote: »

See this is the stuff I'm researching now, I maxed out my pension contributions and looking at the following book sent on to me:
https://www.moneyforsomething.org/book/

Which basically says start investing in ETF's now, I've been trying to figure out my next steps. Been trying to find out if there is a course or any other reading material out there for it.

https://www.futurelearn.com/courses/managing-my-investments

Perhaps of interest?

RedXIV

Merowig wrote: »

https://www.futurelearn.com/courses/managing-my-investments

Perhaps of interest?

Awesome! Thanks a million!

Elessar

keane2097 wrote: »

I was under the impression that the Vanguard ETFs had a minimum initial purchase but it appears they don't... Great!

I've got a DeGiro account set up but haven't deposited any funds to it as was trying to decide whether to put the cash I'm putting aside into the pension or into the investments, but I must actually pull the trigger now.

I'm kinda new to this aswell - I hear vanguard EFTs being spoken of a lot, are they a well known company? I had a look at their site but accounts seem to be for US only

Elessar

Elessar wrote: »

I I hear vanguard EFTs being spoken of a lot, are they a well known company?

Very much so, and well regarded more importantly.

Elessar wrote: »

I had a look at their site but accounts seem to be for US only

With DEGIRO, Davy etc you can avail of Vanguard...... these are available to buy through Davy for example...


Vanguard FTSE 100 UCITS ETF UK Equity

Vanguard FTSE All-World UCITS ETF Global Equity


Vanguard FTSE All-World UCITS ETF EUR Global Equity

Vanguard FTSE Developed Europe ex UK UCITS ETF European Equity


Vanguard FTSE Developed Europe UCITS ETF European Equity


Vanguard FTSE Emerging Markets UCITS ETF Emerging Market Equity


Vanguard S&P 500 UCITS ETF US Equity

I wouldn't forget iShares either.

Merowig

Though as far as I know only with Davy you can wrap it in a PRSA so you cna avail of the tax incentive.
DEGIRO doesn't offer that afaik.

Merowig

Merowig wrote: »

...........
DEGIRO doesn't offer that afaik.

Indeed, Degiro don't/can't facilitate pension arrangements.

Davy are good for pensions if the ETFs are London Stock Exchange listed.

keane2097

There's no benefit to going the PRSA route if you are already maxing occupational pension tax relief right?

..... indeed, better off investing some of your net money.

Merowig

keane2097 wrote: »

There's no benefit to going the PRSA route if you are already maxing occupational pension tax relief right?

In case you didn't max out in 2015 you can make still a once off contribution till 31.10.2016.

keane2097

Merowig wrote: »

In case you didn't max out in 2015 you can make still a once off contribution till 31.10.2016.

Oh thanks, that's very useful info.

Merowig

www.revenue.ie/en/about/foi/s16/pensions/chapter-24.pdf

Page 4

JJs Left Hand

Hi,

Same age as the OP and starting my pension in the next few weeks. There is a scheme in work which is the Clear PRSA with Irish Life. This is the only option and employer doesn't make any contributions to it.

Went to a financial planner today for an initial meeting and they say that a PRSA doesn't make any sense due to the 5% contributory charge and that a personal pension plan would be better. Meeting them next week again to view the options they will recommend for me.

I'll compare the options with the work scheme when I get them but my question is: is there a clear and obvious benefit with doing it through work? What I mean is if, say, I want to contribute 300 a month to my pension I know only approx. 180 will come out of my monthly wages. Will the same apply if I go with a pension scheme outside work or will the full 300 come out and then I have to claim the tax back at the end of the year? Reading up on it I can claim back 15% on tax relief up to the age of 30 but 15% of what?

I'll ask this of the financial planner as well - just checking in here first so I don't come across a complete spa.

Cheers.

Merowig

JJs Left Hand wrote: »

Hi,

Same age as the OP and starting my pension in the next few weeks. There is a scheme in work which is the Clear PRSA with Irish Life. This is the only option and employer doesn't make any contributions to it.

Went to a financial planner today for an initial meeting and they say that a PRSA doesn't make any sense due to the 5% contributory charge and that a personal pension plan would be better. Meeting them next week again to view the options they will recommend for me.

There are at least three PRSAs without any contribution charges
Two are through http://www.labrokers.ie/pensions/

And one at http://www.davyselect.ie/pensions

A PRSA with contribution charges doesn't make sense - but without its ok.

If a personal pension plan makes sense depends on their fees and other conditions. Under a personal pension plan there are no statutory maximum charges!
Caveat emptor!

I'll compare the options with the work scheme when I get them but my question is: is there a clear and obvious benefit with doing it through work?

Only if your company is making contributions or their PRSA has no contribution fee and low annual management fees.

What I mean is if, say, I want to contribute 300 a month to my pension I know only approx. 180 will come out of my monthly wages. Will the same apply if I go with a pension scheme outside work or will the full 300 come out and then I have to claim the tax back at the end of the year? Reading up on it I can claim back 15% on tax relief up to the age of 30 but 15% of what?

You can claim back 20% or 40% on your contributions - depending on the bracket you are in. You can contribute up to 15% of your gross salary and get 20% or 40% back of that contribution amount. If you contribute more this won't be tax efficient.
You claim back typically after years end.

JJs Left Hand

Thanks. Appreciated.

I'm thinking of setting up a PRSA with Davy and investing in US domiciled ETF'S. I'll buy them in €2500 installments as there is a €25 fee for buying foreign ETF'S. This will keep the % cost down. As they are US domiciled ETF'S they are treated the same as shares by revenue. So income tax and US witholding tax on dividends and CGT when selling. Will have to keep a record of dividends paid out each year and each purchase of more ETF's but this is simple enough with a spreadsheet on Excel.

Merowig

Are any dividends from ETF's in a PRSA not automatically staying in the respective PRSA? If so I wouldn't expect tax on them?

Merowig

Merowig wrote: »

Are any dividends from ETF's in a PRSA not automatically staying in the respective PRSA? If so I wouldn't expect tax on them?

Not 100% sure so I'm presuming worse case scenario. When I set up the account with Davy I'll ask them. Currently buying my first house so won't pull the trigger on my plan for a few months after when everything settles down. I don't want to overstretch myself for the sake of a few months.

Merowig

MAXFANTANA wrote: »

Not 100% sure so I'm presuming worse case scenario. When I set up the account with Davy I'll ask them. Currently buying my first house so won't pull the trigger on my plan for a few months after when everything settles down. I don't want to overstretch myself for the sake of a few months.

Please let us know then - Or perhaps Augeo can say something in regards to this?

keane2097

Anyone know of a Europe based equivalent of the iShares ETF ITOT?

I've come across CSPX alright, but that only invests in large cap US companies, whereas ITOT gives a broader selection of companies...

JJs Left Hand

Met with a Finanical Advisor. They've recommended going with a Friends First policy called Compass Portfolio. No contribution charge and an AMC of 1.15% (0.9 of that to Friends First and 0.25 to the Financial Advisor).

Anyone any experience with that policy? Does it sound reasonable? From the research I've done it seems a good option but I'm a complete novice.

LaGlisse

Forget about it,the ladder has been pulled up. The baby boomers think they can sit back and fiddle while following generations slave to keep them going. It won't last

Merowig

JJs Left Hand wrote: »

Met with a Finanical Advisor. They've recommended going with a Friends First policy called Compass Portfolio. No contribution charge and an AMC of 1.15% (0.9 of that to Friends First and 0.25 to the Financial Advisor).

Anyone any experience with that policy? Does it sound reasonable? From the research I've done it seems a good option but I'm a complete novice.

There are PRSAs with 1% AMC (Zurich or Irish Life through LA Brokers) or self directed with 0.75%+x (with Davy and you can keep x small enough that the total is 1% or less) - all 3 with no contribution charge

So why do you want to pay 1.15%? Where is the value added service?
You have to secure your retirement - not the retirement of your broker/financial advisor.

whatawaster

I'm also 30 and have been looking at starting a pension.

Work has a PRSA scheme with Irish life. There is a 5% contribution charge and a 1% annual fee. However, employer will top up my contributions by 10%. So I guess this makes this more attractive than any alternative pension schemes/PRSA's? (I calculate that 104.5% of own contributions will be invested - 100% X 10% employer contribution x 95% allocation rate)

I see Irish life have several passive funds such as "Indexed Irish Equity Fund" "Indexed European Equity Fund" etc

Are these similar to ETF's and are they the best way to go within PRSA?

Merowig

Yes because of your employers contributions this is the most attractive option.


In regards to chosing the fund this is up to you - I am in my mid-30s and my old PRSA and as well my current DC scheme are 100% in equities.
Others would prefer perhaps 90% equities and 10% bonds - or no equities at all.
Personally I would look for a more global fund which includes European and North American equities to have it a bit more diversified.

With equities you can have something of a roller coaster - though in the long term they are historically the best option.
http://www.irishtimes.com/business/personal-finance/irish-pension-savers-lose-3-7-amid-q1-market-volatility-1.2597767

If you are more cautious you might need to accept that the fund won't grow that much.
http://www.independent.ie/business/personal-finance/pensions/why-is-my-pension-fund-not-worth-more-than-what-my-boss-and-i-have-saved-into-it-so-far-34390986.html

tatumkelly

JJs Left Hand wrote: »

Met with a Finanical Advisor. They've recommended going with a Friends First policy called Compass Portfolio. No contribution charge and an AMC of 1.15% (0.9 of that to Friends First and 0.25 to the Financial Advisor).

Anyone any experience with that policy? Does it sound reasonable? From the research I've done it seems a good option but I'm a complete novice.

Re the AMC, the 0.9% to Friends First is only as high as 0.9% because the advisor is selecting the maximum commission on your regular premium. The 0.25% is trail commission; this is paid to the advisor by the provider to cover the ongoing costs year after year of going to see you and review your policy and investment options. I don't think anyone objects to advisors getting a small fee, but the reality is that most do not actively manage their clients and you will rarely (if ever) see them again after the initial set up.

Compass is a passively managed fund, has a lower AMC of 0.65% (this is only quoted as 0.9% because of commission option selected by advisor) than it's actively managed sister fund 'Magnet'.

Compass Portfolio is an ESMA 5 rated fund (risk ratings go from 1-7) so this is a relatively high risk fund with large exposure to equities. All managed funds have been quite volatile recently and this particular fund is -9.21% in the past 12 months. Fine choice assuming you're young, are only really looking at investing regular premiums (so will benefit from highs & lows) rather than transferring a lump sum of say 100k into the fund (as this will instantly suffer losses and is a tough one to justify at the moment).

Hope this helps

JJs Left Hand

That's a great help, cheers. I'm 30 and it'll be monthly contributions - definitely no lump sum at the minute and no chance barring miracles of investing 100k in anything.

Meeting the FA this evening so will dig a bit more information out of them but from what you've said there it sounds like a waste of money using an FA.

As someone with zero experience or knowledge of investments choosing a pension is a pain in the hole really isn't it.

Merowig

JJs Left Hand wrote: »

That's a great help, cheers. I'm 30 and it'll be monthly contributions - definitely no lump sum at the minute and no chance barring miracles of investing 100k in anything.

Meeting the FA this evening so will dig a bit more information out of them but from what you've said there it sounds like a waste of money using an FA.

As someone with zero experience or knowledge of investments choosing a pension is a pain in the hole really isn't it.

I would go for the cheapest PRSA available. As over long periods and consistently adding funds the difference will fast accumulate in fees and having significant impact on any pension fund size at retirement age.

The only exception to justify higher fees would be if there is real value added - which would be fund performance above market average - which doesn't seem to be the case here!

tatumkelly

JJs Left Hand wrote: »

That's a great help, cheers. I'm 30 and it'll be monthly contributions - definitely no lump sum at the minute and no chance barring miracles of investing 100k in anything.

Meeting the FA this evening so will dig a bit more information out of them but from what you've said there it sounds like a waste of money using an FA.

As someone with zero experience or knowledge of investments choosing a pension is a pain in the hole really isn't it.

I'm a financial advisor..... we do have our uses! Just watch them on the charges, a lot are only about the initial commission and so you end up paying more than you need to in fees. You can find a happy medium ie. advisor still gets paid and you pay reasonable fees in return for a product that suits you and you get ongoing advice and service from your broker.

Merowig

Merowig wrote: »

Are any dividends from ETF's in a PRSA not automatically staying in the respective PRSA? If so I wouldn't expect tax on them?

Merowig wrote: »

Please let us know then - Or perhaps Augeo can say something in regards to this?

You are correct, except for the US witholding tax on dividends that will be applied, that of course never gets to your PRSA account. That and the fee for buying US domiciled ETFs makes them less than attractive to me in comparison to UK domiciled ETFs for pension funds. As mentioned €25 is 1% of €2500 so one could easily exceed the contribution charges of other PRSA providers by buying some ETFs in small amounts repeatedly.

tatumkelly wrote: »

Re the AMC, the 0.9% to Friends First is only as high as 0.9% because the advisor is selecting the maximum commission on your regular premium. The 0.25% is trail commission; ......

As well as the trail commission does the advisor get some proportion of the 0.9%?

I was under the impression that with Davy for example, of the 0.75% annual fee they may pay up to 0.5% of that to your advisor if you have one.