If you are thinking of switching/changing your pension provider because you are none too happy about the level of charges on your product, consider the following:
If a person saved €1,000 per month (index linked at 3%) from the age of 30 to 65, the estimated retirement fund at 65 would be €1,472,823. This assumes that there is a 5% contribution charge on each payment made, the annual management charge is 1.5% and the fund grows at 6%pa.
Using the same details for contribution,term and growth rate, but having an annual management charge of 1% and no contribution change, the estimated fund would be €1,673,568.
That's over €200,000 in potential savings. Is that a good enough reason to change?
Tuesday, October 20, 2009
Monday, September 28, 2009
Convertible Term Insurance
One would be forgiven for thinking that a product like Term Insurance should be pretty easy to understand. Normally, you pay a fixed premium for a fixed sum insured for a fixed term, end of story.
However, throw the word 'Convertible' in front of Term Insurance and a myriad of terms and conditions appear that are not standard throughout the Life Insurance Industry. 'Convertible' refers to the option of converting the existing policy to another type of policy, at some date in the future, without medical evidence.
The notion that price is the only deciding factor for a Convertible Term Insurance policy is a nonsense. Flexibility of the conversion option, in my opinion, carries much more weight.
In a recent e-mail survey of the Life offices offering Convertible Term policies in Ireland I asked a number of questions regarding the flexibility of the policy and what, exactly, were the policyholders options on the 'conversion' date.
Aviva/Hibernian Life - You cannot convert to a Pension Term Insurance. If you were a smoker when you took the original policy out but qualify as a non-smoker now, full underwriting (new proposal) is required to change the policy, during or at the end of the policy term.
Caledonian Life - You can convert to a Pension Term Insurance. Client would get non-smoker rates at date of conversion and existing policy can be altered (premium reduction) to take into account non-smoker status after qualifying period.
Canada Life - If you were a smoker when you took the original policy out but qualify as a non-smoker now, full underwriting (new proposal) is required to change the policy, during or at the end of the policy term. You cannot convert to a Pension Term Insurance.
Eagle Star/Zurich Life - You can only convert the policy at the end of the original term (not during). If you were a smoker when you took the policy out but qualify as a non-smoker now, full underwriting is required to change the policy. You cannot convert to a Pension Term Insurance.
Friends First - Non-smoker rates can be availed of at the end of the policy term if you are converting to a new policy, without full underwriting. Smoking status cannot be altered during the original term of the policy.
Irish Life - Converting to Pension Term Insurance is not an option. If you were a smoker when you took the original policy out but qualify as a non-smoker now, full underwriting (new proposal) is required to change the policy, during or at the end of the policy term.
New Ireland - No Response (yet!).
It is likely that the majority of the above companies will have to review their product offerings. The profitability of this type of product is dependent on the term that it stays in force. It makes no sense whatsoever to 'force' the policyholder to jump through hoops (ie. new application with full underwriting) if they need to make an alteration to an existing policy. It is hard to reconcile how a product provider can make money on these products when an alteration will, more than likely, drive their client to another product provider.
At the moment, the Caledonian Life policy offers the greatest flexibility, at a competitive price; but this is based on current underwriting practice.
However, throw the word 'Convertible' in front of Term Insurance and a myriad of terms and conditions appear that are not standard throughout the Life Insurance Industry. 'Convertible' refers to the option of converting the existing policy to another type of policy, at some date in the future, without medical evidence.
The notion that price is the only deciding factor for a Convertible Term Insurance policy is a nonsense. Flexibility of the conversion option, in my opinion, carries much more weight.
In a recent e-mail survey of the Life offices offering Convertible Term policies in Ireland I asked a number of questions regarding the flexibility of the policy and what, exactly, were the policyholders options on the 'conversion' date.
Aviva/Hibernian Life - You cannot convert to a Pension Term Insurance. If you were a smoker when you took the original policy out but qualify as a non-smoker now, full underwriting (new proposal) is required to change the policy, during or at the end of the policy term.
Caledonian Life - You can convert to a Pension Term Insurance. Client would get non-smoker rates at date of conversion and existing policy can be altered (premium reduction) to take into account non-smoker status after qualifying period.
Canada Life - If you were a smoker when you took the original policy out but qualify as a non-smoker now, full underwriting (new proposal) is required to change the policy, during or at the end of the policy term. You cannot convert to a Pension Term Insurance.
Eagle Star/Zurich Life - You can only convert the policy at the end of the original term (not during). If you were a smoker when you took the policy out but qualify as a non-smoker now, full underwriting is required to change the policy. You cannot convert to a Pension Term Insurance.
Friends First - Non-smoker rates can be availed of at the end of the policy term if you are converting to a new policy, without full underwriting. Smoking status cannot be altered during the original term of the policy.
Irish Life - Converting to Pension Term Insurance is not an option. If you were a smoker when you took the original policy out but qualify as a non-smoker now, full underwriting (new proposal) is required to change the policy, during or at the end of the policy term.
New Ireland - No Response (yet!).
It is likely that the majority of the above companies will have to review their product offerings. The profitability of this type of product is dependent on the term that it stays in force. It makes no sense whatsoever to 'force' the policyholder to jump through hoops (ie. new application with full underwriting) if they need to make an alteration to an existing policy. It is hard to reconcile how a product provider can make money on these products when an alteration will, more than likely, drive their client to another product provider.
At the moment, the Caledonian Life policy offers the greatest flexibility, at a competitive price; but this is based on current underwriting practice.
Tuesday, September 22, 2009
Best Pension Fund
Reluctant as I am to do a post on the past performance of pension funds, it is probably better to do one where it can be put in its correct context, rather than relying on it as an indicator as to what might happen in the future.
I would like to start by saying, what has gone before has no relevance as to what may happen in the future. Having said that, it would appear that many pension policyholders ( or potential pension policyholders) continue to study the past performance of pension funds with a view to factoring it in to their overall evaluation of how their pension is doing or indeed how it might do in the future.
If you need to study past performance, then I would suggest that you select 3 or 4 random documents from this page. The reason that I would take random documents is because fund managers can produce at least one period where they may be Number 1 on a specific single fund.
The information included in these monthly investment reviews are for the last five years from one product provider, but include the relevant data for all pension providers. There are, up to 13 categories of funds included and the data is broken down over 1, 3, 5, 10, and 15 year annualised returns.
In summary, you should take past performance with a pinch of salt and don't rely on it as a deciding factor on which pension provider is best for you. It is better to focus on the costs/charges, suitablity, flexibility and service available on the product.
Featured website www.prsa.ie
Warning: The income you get from an investment may go down as well as up. The value of your investment may go down as well as up. Benefits may be affected by changes in currency exchange rates. Past performance is not a reliable guide to future performance.
I would like to start by saying, what has gone before has no relevance as to what may happen in the future. Having said that, it would appear that many pension policyholders ( or potential pension policyholders) continue to study the past performance of pension funds with a view to factoring it in to their overall evaluation of how their pension is doing or indeed how it might do in the future.
If you need to study past performance, then I would suggest that you select 3 or 4 random documents from this page. The reason that I would take random documents is because fund managers can produce at least one period where they may be Number 1 on a specific single fund.
The information included in these monthly investment reviews are for the last five years from one product provider, but include the relevant data for all pension providers. There are, up to 13 categories of funds included and the data is broken down over 1, 3, 5, 10, and 15 year annualised returns.
In summary, you should take past performance with a pinch of salt and don't rely on it as a deciding factor on which pension provider is best for you. It is better to focus on the costs/charges, suitablity, flexibility and service available on the product.
Featured website www.prsa.ie
Warning: The income you get from an investment may go down as well as up. The value of your investment may go down as well as up. Benefits may be affected by changes in currency exchange rates. Past performance is not a reliable guide to future performance.
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