Being ripped off with by AVC

[thex]

Former HSE employee here. Left 15 years ago to move to the private sector and still have a few years to go to retirement.

At the time I left I had paid c.28k into an AVC with New Ireland. It’s always performed poorly, and the latest ststement has said that the value on retirement (in today’s money) is less than the 28k I paid in all those years ago, ie. negative growth (for comparison my other pensions have grown 6-7% year-on-year).

I queried the poor performance and was told that fees had basically eaten all the profits (up to 6.75% fees on capital units). I also threatened to close it down and transfer the balance into another pension, however I was informed that this wasn’t permitted under the rules of the scheme, ie. according to them, I’m locked into a scheme where New Ireland are reaping large profits from my money, but I’m making nothing!

My question is, is it legal to refuse to allow me to withdraw from the scheme, particularly in light of the fact that they have provided paperwork showing a transfer/surrender value just south of 26k?

Next step is the ombudsman but I want to get a better idea of where I stand before I contact them.

 

[hendrix]

@thex Ask them for

1) a copy of the policy conditions
2) details of the funds available

I used to work for a different company

Older pension products had Capital Units.

Capital units bought in years 1 & 2. Thereafter, accumulated units were bought. Premium increases and indexation were treated in a similar manner.

Capital Units are subject to an Fund Management Charge of 6.75% per annum which is reflected in the price declared.

See if you can transfer it to a AVC PRSA.

If you are allowed to transfer......there would be a deduction applied which is a proportion of the value of the Capital Units held.

The deduction is basically a recoup of some of the commission paid.

In that case.....transferring would not be advisable as you'd lose a further chunk of value.

The intention of the contracts with Capital Units is they are maintained to the retirement age noted on the scheme.

How long were you paying into it?

Ask them for a Unit Allocation Statement. This will show the number of Capital Units and the number of Accumulated Units as well as the total value of each type.

 

[donny4793]

@hendrix This is why people don’t invest in pensions… that’s a very complicated answer for “can I get my money back and put it where I want?”

 

[hendrix]

@donny4793 There are rules and regulations about drawing down pension benefits and where you can transfer them to.

People just don't understand them.

You cannot just say "I want me money".

 

[aliahmed]

@thex We use New Ireland too and I'm honestly surprised that they even responded to you.

We've been asking to switch away from them for years due to the extraordinary poor performance, during the longest bull market in recent years!

I don't have any advice for you unfortunately but wanted to chime in on how awful New Ireland are, terrible performance, high fees, shockingly poor customer service, stupendously dated web portal. I don't have anything good to say about them. Anyone thinking of using them should steer well clear.

 

[affenick]

@thex Advice to anyone looking to move pensions get in touch with a financial planner they will do it all for you save you the hassle of harassing new ireland etc

 

[thesweetestperfection]

@thex Whatever happens with this, an update when you get sorted would be good please.

 

[roseofsharon38]

@thex Capital units would have been something from many years ago, your broker would have been taking very large commission and the capital units are how the life companies reclaim this commission they’ve paid out (possibly 60+% of your premiums). Capital units would only have been bought in year 1 and also only on increases in subsequent years but not at all in recent years.

Given you’ve said the pension has always performed poorly I would guess you have not been in a risky enough fund and/or you paid your premiums over a short period of time making them heavily in capital units while most would only hold a small amount in capital and a large amount in accumulation units which would have management fees more like 0.75%

The AVC policies are linked to your HSE pension, so unless you were also transferring or taking benefits from that, you can’t move the AVC policy alone. This rule is from Revenue I believe rather than New Ireland or any other life company.

Projections are just that, I wouldn’t pay much heed to them as the assumptions were changed recently to lower % market gains and it really depends which fund you select what risks you’d be exposed to.

 

[codi]

@thex Are Irish Life AVCs any good

 

[thex]

@codi I have an Irish Life AVC with my current employer and I have no issues with that one - it’s doing very nicely.

 

[khan1123]

@codi Interested in hearing people's opinions here as it's what I pay into. Not much transparency on funds outside of low detail graphs.

 

[pgl]

@khan1123 What is wrong with this ? https://www.irishlife.ie/investments/fund-prices-and-performance-investments/

 

[khan1123]

@pgl Thanks very much. Had a lady direct me at a seminar to something a lot more vague than this page after I had asked.

Much appreciated!

 

[pgl]

@khan1123 Bear in mind that the admin for your policy will only allow a subset of these.

 

[0nedayatatime]

@thex That is a crazy few per annum! You'd want to be making 14% growth every year to have a decent pot by retirement which is just insane. It sounds like a scam.

 

[casterberry]

@thex OP how did you get on with this? I am also with New Ireland and a similar position to you. I have ceased payments into but have seen absolutely no growth.

Were you able to transfer to another provider?

 

[thex]

@casterberry Apparently (according to them) it falls under the rules of public sector AVC schemes that it can’t be transferred to another provider. After looking into this it appears there may be some truth in this, however this wasn’t made clear to me at any stage either verbally or in the plan documentation. I haven’t contacted the ombudsman yet, but if I do my only option may be to make the case that it was mis-sold because I wasn’t informed that it was non-transferable.

 

[penfire1]

@thex Why don't U check the documents U signed setting it up? It is generally permitted to move AVC funds to ur current pension or to use to buy back years in current pension however as this was public sector & it's historical it may be linked to the actual pension U held at the time. Also, given the time U mention...remember there was a huge recession from 2008 that funds never recovered from & we are in a mini recession the last couple of years when it comes to investments.

 

[saravr]

@thex You could enquire about buying extra years service with you pot....effectively you cannot set up a new contract on better terms as you no longer work for the HSE, if you were it would be straight forward. The reason for this is the policy is linked to the overall scheme as an AVC PRSA.

I'm guessing you took this out through a union approved scheme....the unions have been greasing there hands for years through these schemes meaning you cannot use a broker but only the approved broker that's how cornmarket grew.

I would agree with other posters about investment returns, unless you take sufficient risk the fund will underperform the provider is largely irrelevant, if you were in low risk (long bonds) you lost 20+% last year with no recovery since