Wednesday, November 30, 2016

PRSA AVCs for Public Service Employees

PRSA AVCs are Additional Voluntary Contributions made through a Personal Retirement Savings Account.

PRSA AVCs are a convenient method of funding for additional retirement benefits for the following reasons.

  • Give you control over your choice of funds and provider
  • Valuable tax relief is available
  • Potential for a larger tax-free lump sum at retirement
  • Access to an ARF/AMRF at retirement
  • PRSA AVCs are easy to understand and easy to set up
  • PRSA AVCs could help you retire early
Scope to make PRSA AVCs and maximise your retirement benefits.

You can make PRSA AVCs if the benefits that you will receive at retirement from your superannuation scheme and any benefits retained from previous employments, are projected to be lower than the maximum allowed by Revenue.

The following are examples of where there will be scope for providing additional benefits:

  • Missing Years

If you do not expect to have full service, you could use PRSA AVCs to make up part or all of the difference between the maximum allowable tax-free lump sum and the tax-free lump sum based on shorter service.

Likewise, you could use PRSA AVCs to bring your pension up to the maximum allowed by Revenue.

  • Non-pensionable Earnings

If you have non-pensionable earnings (e.g. overtime) you could use PRSA AVCs to fund for a pension based on your total earnings.

  • Social Welfare Integration

Class A PRSI contributors have their pension benefit reduced to take account of their eligibility to receive the contributory retirement pension (single rate). The shortfall between the resultant pension and the maximum allowable pension under Revenue rules can be made up by PRSA AVCs.

  • Spouse’s Pension (Death in Retirement)

The amount of spouse’s pension that can be provided is 100% of the maximum member’s pension. Your superannuation scheme provides a spouse’s pension of 50% of your pension.

  • Additional Member’s Pension

The Revenue maximum pension is 2/3rds of remuneration reduced by the pension equivalent of the lump sum. This maximum pension after lump sum could be as high as 60% of remuneration which leaves significant scope for PRSA AVCs in the public service, where the maximum pension is 50% of pensionable pay.

PRSA AVCs, taken out for any of the reasons highlighted above, can be used to offset the effect of these reductions.

PRSA AVC's are a tax efficient means of saving money.

You can purchase a PRSA AVC with Zurich Life with no contribution charge (100% of your money is invested) and a 1% annual management charge through  

This service is on an ‘execution only’ basis.

Friday, March 4, 2016

The Destruction of the Irish Savings Market

The Irish Government campaign to discourage people from saving must come to an end. 

Regular savers to unit linked (fund) investments have really been maltreated and hounded. Not happy with the Government 1% Levy (Tax) on every contribution to a long-term unit linked saving plan, the current Government Exit Tax on any growth on the funds is 41%. Think about that. It's HUGE.

You're trying to be prudent, saving for the future, taking a risk on your investment and you get hammered on the growth in value. It's mind-blowingly stupid and short-sighted for a Government to maintain an obscene high tax regime on long-term savings. Of course, Governments think in 5 year election cycles so having a plan that goes beyond that short term is a collective anathema.

You can currently get a 'safe' tax-free return of 25% over 10 years (this was 47.5% in 2010 when the bond was introduced) by lending money to the Government via the Solidarity Bond. To get an equivalent current return from a product with a higher 'risk' insured investment fund, the fund would have to grow by about 55%, when you take annual management charges and taxation into consideration.

If we roll the clock back over the last 10 years and look at the SuperCapp Fund with Zurich Life and the With-Profit Fund with Standard Life we can see how difficult it is to compete with a Government sponsored product.

The gross return on the Standard Life Fund over 10 years, to February 2016, is 33.07% - deduct tax @ 41% and you're left with 19.51% net. The person that sold you the product got paid, the fund manager got paid, the Government got paid, but you're left with a paltry return on investment.

The figures for the Zurich Life SuperCapp Fund are a healthier 47.54% gross and 28.05% net. 

What needs to happen is that the Government need to get rid of the levy on these products and reduce the tax rate dramatically  OR introduce a tax efficient scheme like the Individual Savings Accounts (ISAs) in the UK. These allow individuals to save/invest Stg. £15,240 per annum in a variety of tax-free products.

If this doesn't happen, regular savers will be lured back into investing in property again, as the alternatives are so unattractive.

Given the way the Government have raided pension funds in the past and the current prohibitive tax regime on savings, there would want to be some reassurances from them on keeping their mitts off any surprise attacks on savings in the future.

The best person to save for the rainy day is you. So any talk of the Government setting aside a 'rainy day fund' is just nonsense. They'll just blow it, in time.


Wednesday, February 26, 2014

Price Matching - Consumer Obfuscation

You know when you ring your car/house insurance company and tell them that you have secured a cheaper quote, than their renewal, and they tell you that they will match the cheaper quote if you stay with them? Well, that's price matching and consumers are complicit in its growth as a way for insurers to gain and retain business.

It has slowly, but surely, made it way into the Life & Pension sector over the last number of years but regulators, consumer interest groups and advertising standards have ignored it. It's mainly in the term assurance market but is now standard practice, on annuities, for the largest insurer in the Country.

I have maintained that this practice inhibits competition and stifles innovation. It's the lazy mans way of pricing your product and not giving a toss about competing for business on product features.

If you're accepting business at a price lower than your book rate then you're effectively 'buying business'. I mean, why have 'rates' at all if you're just going to do it for the same price as your cheapest competitor?

Recently, Friends First held their hand up and admitted the following:

"We aim to do all we can to meet customers’ needs through offering high quality products at affordable premiums, ensuring transparent communication of charges and fees and providing unambiguous marketing literature. As a consequence, we have removed ‘price matching’ from our protection policies to improve customer transparency while improving the cost of our premiums at the same time.  You will now notice price cuts are across level and decreasing term products."

They've caught the bull by the horns and effectively blown the 'competition' out of the water by "doing all [they] can to meet customers’ needs through offering high quality products at affordable premiums, ensuring transparent communication of charges and fees, providing unambiguous marketing literature and rewarding them for long-term loyalty."

Answer that Caledonian Life, Aviva Life & Pension, Irish Life and New Ireland Assurance. NB : Zurich Life don't 'price pledge' and well done to them for not sinking that low.