Pension Comparison

burly

Hi all,

So I am in the process of starting a pension, have two options and am trying to decide which one is best. It's a bit like comparing apples with oranges but I'm hoping some of my clever boards.ie contributors might be able to help.

Company Pension
My employer won't actually pay any contributions into this themselves, but it's open for me to join to avail of the rates etc, and have it deducted from gross pay.Monthly Management Charge: €12/month forever
Contribution Charges: 25% for 24 months, 0% thereafter.
Annual Charge: 1%.

Standard PRSA
Contribution Charges: 0% (for example with Labrokers/Davy)
Annual Charge: 1%.

I am trying to work out which one is best long term (say €300 per month contribution for 30 years), assuming the same growth rates. At first glance, it would appear that the Standard PRSA is the best of the two options, but am I right in saying that Standard PRSA's are subject to PRSI and USC, whereas contributions to a company scheme are not? Presumably, that could swing it back in favour of the company scheme?

(Other factors)

• I have to be loyal to the company for 10 years or more to avail of a loyalty bonus.
• I I switch jobs before 3 years, i lose any gains, and just get a bond for what I contributed. More personal control with the PRSA I think?)
• PRSA's require communication with Revenue every time you change contribution amount, correct?

Thanks in advance.

Henry Ford III

Something isn't right there. In a company pension there must be an employer contribution of a minimum of 10% of the total ordinary contributions.

burly

Henry Ford III wrote: »

Something isn't right there. In a company pension there must be an employer contribution of a minimum of 10% of the total ordinary contributions.

Your quite right, assume that is going in. I am getting an increase in pay, and I plan to put the increase into my pension. Assume for the purpose of my query, that the employer is putting in the 10%.

Grassey

Is the contribution charge 24 months on each and every increase? And 12pm policy fee seems ridiculously high.

Heres Johnny

Get a detailed projection from both.

Use the exact same growth rate, time in fund, contribution amount. Apples v apples all the way. You can't tell when they apply different charges like they have which is better.

You will see value every year up to retirement.

The one with the higher projection is the one with lower charges.

Then you have to think about the funds themselves. How are they managed, what are they trying to achieve.

My pension fund is 0.5% management charge. It's the management charge that causes reduction in yield as it's a percentage of the whole fund, not the monthly premium.

Henry Ford III

Heres Johnny wrote: »

Get a detailed projection from both.

Use the exact same growth rate, time in fund, contribution amount. Apples v apples all the way. You can't tell when they apply different charges like they have which is better.

You will see value every year up to retirement.

The one with the higher projection is the one with lower charges.

Then you have to think about the funds themselves. How are they managed, what are they trying to achieve.

My pension fund is 0.5% management charge. It's the management charge that causes reduction in yield as it's a percentage of the whole fund, not the monthly premium.

It's not that simple as competing quotations aren't supposed to be used as basis of comparison of future benefits (bizzare as that sounds).

Even assuming an identical return you'll find different assumptions on last premium, investment term etc.

It's a bit of a minefield. I'd advise getting and paying for proper advice from a fee charging advisor (with P.I.).

notharrypotter

Henry Ford III wrote: »

Something isn't right there. In a company pension there must be an employer contribution of a minimum of 10% of the total ordinary contributions.

Curious, can you post a link?

Heres Johnny

Henry Ford III wrote: »

Heres Johnny wrote: »

Get a detailed projection from both.

Use the exact same growth rate, time in fund, contribution amount. Apples v apples all the way. You can't tell when they apply different charges like they have which is better.

You will see value every year up to retirement.

The one with the higher projection is the one with lower charges.

Then you have to think about the funds themselves. How are they managed, what are they trying to achieve.

My pension fund is 0.5% management charge. It's the management charge that causes reduction in yield as it's a percentage of the whole fund, not the monthly premium.

It's not that simple as competing quotations aren't supposed to be used as basis of comparison of future benefits (bizzare as that sounds).

Even assuming an identical return you'll find different assumptions on last premium, investment term etc.

It's a bit of a minefield. I'd advise getting and paying for proper advice from a fee charging advisor (with P.I.).

That's why I was saying keep all assumptions the same. Any life company should be able to do a like for like comparison quote.

Assumed return
Premium amount and frequency
Retirement date

Henry Ford III

Heres Johnny wrote: »

That's why I was saying keep all assumptions the same. Any life company should be able to do a like for like comparison quote.

Assumed return
Premium amount and frequency
Retirement date

Probably should but won't.

Merowig

burly wrote: »

Hi all,


Company Pension
My employer won't actually pay any contributions into this themselves, but it's open for me to join to avail of the rates etc, and have it deducted from gross pay.Monthly Management Charge: €12/month forever
Contribution Charges: 25% for 24 months, 0% thereafter.
Annual Charge: 1%.

Standard PRSA
Contribution Charges: 0% (for example with Labrokers/Davy)
Annual Charge: 1%.

I am trying to work out which one is best long term (say €300 per month contribution for 30 years), assuming the same growth rates. At first glance, it would appear that the Standard PRSA is the best of the two options, but am I right in saying that Standard PRSA's are subject to PRSI and USC, whereas contributions to a company scheme are not? Presumably, that could swing it back in favour of the company scheme?

(Other factors)

• I have to be loyal to the company for 10 years or more to avail of a loyalty bonus.
• I I switch jobs before 3 years, i lose any gains, and just get a bond for what I contributed. More personal control with the PRSA I think?)
• PRSA's require communication with Revenue every time you change contribution amount, correct?

Thanks in advance.

So does the employer contribute now or not? If not clearly go for the PRSA.
No difference in regards to PRSI/USC between both options.

If you leave the company but paid 2 years in , you can usually leave the investments where they are and you start a new pension somewhere else. As usually (but not in this case) the charges are lower in company pension schemes.
12 Euro monthly management charge plus a further 1% yearly, plus 25% contribution charge for the first two years sounds expensive.

Henry Ford III

Co. scheme offers greater planning options (salary and service method may increase tax free cash) and also has early retirement possibility from age 50.

Henry Ford III

notharrypotter wrote: »

Curious, can you post a link?

https://www.revenue.ie/en/tax-professionals/tdm/pensions/chapter-04.pdf

See chapter 4.1