Carnmorket AVC v Devy PRSA

ShatterResistant

Hello all! Looking for some advice on the eternal question of what the best option is when it comes to choosing an AVC/PRSA.

Starting out a job in the public service (mid-20's) and looking to get into good financial habits from day one - so while I'm a member of the single scheme, I'm thinking of putting away a sum every month (~€250 p/m) in addition to the compulsory contributions. I still have a solid 40 years or so until retirement so my main goal is flexibility, that if I want to take a career break or perhaps to take cost neutral early retirement, that the option is there. Equally if I choose to change jobs or go into the private sector, that I might have options to carry on the same pension pot.

My initial temptation is to just go for the union-endorsed AVC option - payroll deduction with tax relief at source, 1% AMC, 100% allocation on regular contributions, and to my knowledge no other fees (?) bar the application fee. Less flexibility with how it's invested, though there does seem to be a few more funds than the suggested PS Strategies. I don't get the impression people have a lot of love for Carnmorket, but I'm not sure why if anyone can enlighten me?

The second option I'm looking at is the execution-only PRSA account with Devy - .75% AMC, ~0.2-0.4% fee for fund costs, and a much greater selection of funds if one is so inclined, or more likely I'll just buy Vanguard/iShares units that passively track the index. Pain in the hoop being the need to manually claim back tax relief annually, the discipline to stick with the direct debits, and the need to taper in the investments closer to retirement.

Are there any factors I'm glaringly missing out on here when making a decision in this regard?

As I understand it, if my civil service pension is preserved before retirement, any AVC's paid along side it are also preserved and cannot be retired any earlier - does the same apply to the PRSA, even if I carry it on to a new job and keep paying in, where I would normally be allowed to retire at 60-65 (rather than 68 with the civil service)?

Any help or suggestions would be greatly appreciated!

Jim_Hodge

All I'd say is I never had a good experience with Cornmarket and they hound you marketing investments and insurance products. They do have annual fees, or at least they used to.

gypsy79

ShatterResistant wrote: »

The second option I'm looking at is the execution-only PRSA account with Devy - .75% AMC, ~0.2-0.4% fee for fund costs, and a much greater selection of funds if one is so inclined, or more likely I'll just buy Vanguard/iShares units that passively track the index. Pain in the hoop being the need to manually claim back tax relief annually, the discipline to stick with the direct debits, and the need to taper in the investments closer to retirement.

Are there any factors I'm glaringly missing out on here when making a decision in this regard?

As I understand it, if my civil service pension is preserved before retirement, any AVC's paid along side it are also preserved and cannot be retired any earlier - does the same apply to the PRSA, even if I carry it on to a new job and keep paying in, where I would normally be allowed to retire at 60-65 (rather than 68 with the civil service)?

Any help or suggestions would be greatly appreciated!

The second option is more expensive in reality. There would a third level of charges implicit in the ishares and equivalents

The J Stands for Jay

gypsy79 wrote: »

The second option is more expensive in reality. There would a third level of charges implicit in the ishares and equivalents

That's not to say that the cornmarket option is in any way good value.

Jim_Hodge

gypsy79 wrote: »

The second option is more expensive in reality. There would a third level of charges implicit in the ishares and equivalents

Don't assume the Cornmarket one will deliver better Net results though.

@ShatterResistant

@ShatterResistant

The AVCs are linked to the main scheme and must be matured at the same time as the main scheme. Doesn't matter if it's a PRSA AVC or an AVC Scheme.

The 1% AMC /100% allocation AVC Scheme product you reference above looks like the one where there is a 4% contribution charge on any single contributions you make and that may not be an issue for you. But, you should be made aware of it. There is no disclosure requirement on an AVC Scheme like there is on a PRSA AVC.

The J Stands for Jay

[Deleted User] wrote: »

@ShatterResistant

The AVCs are linked to the main scheme and must be matured at the same time as the main scheme. Doesn't matter if it's a PRSA AVC or an AVC Scheme.

This would also mean that of you put another employments pension contributions into that PRSA AVC, those will also tie that pension to having the same maturity date as the main scheme.

ShatterResistant

Jim_Hodge wrote: »

All I'd say is I never had a good experience with Cornmarket and they hound you marketing investments and insurance products. They do have annual fees, or at least they used to.

I opted out of all marketing preferences when they were taking my details - though maybe I'm naive for thinking that'll spare me! Every pension product seems to have an annual fee so not really a mark against it surely? By all accounts 1% seems to be one of the better charges all considered.

ShatterResistant

gypsy79 wrote: »

The second option is more expensive in reality. There would a third level of charges implicit in the ishares and equivalents

Do you know what this third level of fee is/relates to? I spoke to Davy on the phone and I was told the 0.75% covers all my dealing charges on their side for instruments in Ireland/the UK, and lets say I buy iShares S&P 500 ETF's in Euro with a 0.2% ongoing charge, no entry or exit fees.

ShatterResistant

Deleted User wrote: »

@ShatterResistant

The AVCs are linked to the main scheme and must be matured at the same time as the main scheme. Doesn't matter if it's a PRSA AVC or an AVC Scheme.

The 1% AMC /100% allocation AVC Scheme product you reference above looks like the one where there is a 4% contribution charge on any single contributions you make and that may not be an issue for you. But, you should be made aware of it. There is no disclosure requirement on an AVC Scheme like there is on a PRSA AVC.

Thanks, I spotted that alright - I'm happy enough just making the regular contributions I think, though it is something to bear in mind I suppose if I ever come into a bit of money I'd have more options with a Davy account.

It's a pity about not being able to retire some funds a bit earlier - it seems a bit arbitrary that two people could have paid the same amount into the same PRSA vehicle for the same number of years, but one could be restricted from withdrawing any up to 8 years later than the other by virtue of what they worked at.

Thanks for the replies!

Henry Ford III

Would you trust Davys after recent disclosures and Central Bank fines?

ShatterResistant

Henry Ford III wrote: »

Would you trust Davys after recent disclosures and Central Bank fines?

I might not trust them as an advisor or on one side of a transaction but for an execution-only platform I’m less bothered. In many ways they’ll be under immense scrutiny going forward.

Minifox

I’ve also read a lot of negative reviews of Cornmarket. They mainly concerned high and sometimes hidden fees but they seem to have reduced their fees lately. I mean their allocation rate is now 100%, for example. At least for regular payments.

On the other hand, their fees still seem high to me. I just looked at their Public Sector Balanced Fund, for example, which has “a standard annual management charge of 1.28%.” It’s not clear to me but I think that’s in addition to their 1% PRSA management charge. Charging 1.28% for an indexed fund is extortionate. Even 0.28% would be high for a true passively managed index fund. The difference in fees of 1% with Davy and 2.28% with Cornmarket over the duration of a pension will turn into oodles of money.

The performance of the Fund against the Benchmark is also very disappointing. In 2020, for example, they managed 0.62% return against the Benchmark’s 6.42%. But come to think of it, how could an Indexed fund underperform a Benchmark? Surely the Index is the Benchmark? Perhaps I’m missing something. I don’t find the Cornmarket website all that illuminating.

I currently have a small PRSA with Davy but claiming back tax relief for pension contributions on an annual basis is a real pain. I’m not being as disciplined about contributions as I could be if I was getting instant relief with salary deductions, as I would do with Cornmarket.

So, now sure which way to go. I’ll Bookmark this thread and find out!