Friday, November 28, 2008

Best Pension (PRSA)

The question often arises as to "What is the 'Best' Pension/PRSA available on the market?"

The answer to this lies in the context to which the question is being asked. For example, does the person posing the question mean 'best' in terms of cost, flexibility, performance, or suitability in terms of their employment status? If we look at these factors in isolation it may shed some light in determining an appropriate response.


The lowest cost Pension/PRSA product is the one that has a competitive charging structure attaching to it. These tend to be the products that have a single charge ie. an annual fund charge only.

It should be noted that these products will probably be available on an 'Execution Only' Service basis. This means that there will be no advice sought by the consumer or given by the product provider/intermediary. You need to have a good understanding of what product suits you best and how to reconcile your attitude to risk with the funds available for investment.


You should look at the product in terms of how adaptable it is to suit your specific circumstances. Can you increase, decrease or stop contributions at will? Can you switch funds at little on no cost at any stage? If you need to transfer your Pension/PRSA to another product provider, can you do so without penalty? Is there a 'Default' or 'Phased' Investment Strategy available on the product?


Consumers tend to focus on historical performance figures when deciding on which product provider is 'best'. The point to remember here is that historical performance is just that; 'historical'. It bears no relationship whatsoever to what may happen in the future. Fund managers have good years and bad years. You should also remember that the Fund Managers don't stay with the same product providers indefinitely, they can, and do, work for different companies in their careers. If you have to consider 'performance' as a key factor in selecting a product provider, then you should probably look at the ones that are in the 'Semi-Finals' on a regular basis.


If you have a choice on which Pension/PRSA is most suitable to your employment status, you should probably pay an Advisor a Fee to help you decide on which product type is 'best' for you. There is no single product available that can be described as the best for a Sole Trader, Employee, Director or Public Servant. It will all depend on your employment status at any particular time and you may have to settle for the product that offers you the greatest flexibility, should you ever switch jobs.

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