Rate my Pension from nfs.ie! 40 y/o, own a limited company

[spiritualseeker1989]

I'm 40 and have (almost) no retirement savings. Ooops!

Fortunately I am the owner of a limited company with decent cashflow and a paid off house. I read here my limited company should be able to make unlimited pension contributions with no BIK, income limits, etc. in 2023.

My accountant suggested I use nfs.ie. NFS is proposing I go with a New Ireland non-standard PRSA that has

• 1.25% annual fee (1% to New Ireland, .25% to NFS)
• no contribution fee
• Additional .25% fee for the particular Goodbody funds they recommend

I'm... mixed. I have a pension from Zurich from my last company and the fees were about .6% per year, so this is higher. 1% seems pretty normal based on what I see at https://www.labrokers.ie/prsas-ireland-personal-retirement-savings-account-pension-plan/.

I kinda feel like saving for a pension is a waste anyway, since Ireland's demographics mean it will be very tempting for future governments to raid private pensions to fund public ones, but I figure I should at least stick money in to this that is currently getting taxed at 52%. If taxes weren't so high I'd do the MrMoneyMoustache thing and just save in index funds but that's less appealing here. I plan to live outside Ireland in retirement (probably still in EU)

Anything I'm missing? Thoughts? Is there a cheaper option? I don't really like actively managed funds that much...

 

[resjudicata]

@spiritualseeker1989 1% is still high by global standards but normal for the Irish market. 1.5% is just highway robbery.

 

[spiritualseeker1989]

@resjudicata Thanks - appreciate that.

 

[danyyyy101]

@spiritualseeker1989 My limited company has an Executive Pension for me with Zurich, and its AMC is 0.5%.

The trick to get the AMC that low is to NOT contribute to the pension every year, but rather do a much larger contribution every second or third year and use the large contribution amount to negotiate down the AMC for that contribution for the rest of its life.

A standard Zurich pension spread will probably return 5% per annum averaged over thirty years. Getting the AMC down from 0.75% to 0.5% means you get 4.5% instead of 4.25%. That's a five figure sum difference on retirement for my pension, it's not peanuts.

I don't rate New Ireland. Everything I've seen that they offer is expensive and has poor returns after their fees compared to alternatives. Zurich is fairly competitive on the other hand, maybe second best returns after fees on the market. But they offer the widest choice for your pension, including very risky choices, so that's what I chose. Zurich has a bunch of actively managed as well as passive funds, they don't do much active management I notice, they mostly follow the herd, but for 0.5% AMC I can't complain too much.

There are a VERY FEW actively managed funds worth their fees. For those you specifically need to choose individual managers, not for whom they are currently working. Irish Pensions give very little choice of funds, so it's very unlikely actively managed funds allows in an Irish pension will ever be worth their fees. So I say lowest possible AMC is the right call for any Irish pension.

My pension is currently 8% below what I put into it, those risky choices burned me But I don't regret a thing.

 

[spiritualseeker1989]

@danyyyy101 Thanks! This is useful.

Do you know who I can pay a fee to to set this kind of thing up to, instead of some annual percent of the fund? Aside from this most recent change I thought I was limited to contributing 25% of my income per year, so doing it over several years would be impractical.

I'm kinda frustrated I have to get on the phone and deal with people. I want to just click buttons on a website.

 

[danyyyy101]

@spiritualseeker1989 There is no way to avoid the AMC in ireland. I investigated that in depth. The provider wants its AMC, but also some AMC needs to be kicked back to the broker for doing the front line customer service ie dealing with people, which is expensive and hassle. The broker can volunteer to take less AMC, but I've never found one willing to take zero in exchange for a fixed fee. They may not be allowed by contract of course.

My broker told me once the lowest AMC possible is 0.35% and he would only drop to that if this specific pension contribution were over 100k. No idea if that wasn't just haggling though.

If you want lowest possible AMC you need to shop around and that means physically meeting people and haggling in person. I don't care for that much, but look at it this way, this is a five figure sum. I don't know about you but if I'm about to spend a five figure sum I research the crap out of it, it's worth my time. Similarly for that type of saving you need spend your time and spending the shoe leather, it's worth it.

In terms of which broker to choose, my local neighbour broker was the cheapest AMC interestingly. I'm in rural North Cork so his costs are lower, but he was also the most hungry for business, willing to go that extra mile. Good on him too.

Finally that 25% annual limit there are ways around that so long as you don't do it every year. If you contribute in December two annual limits can be used. You can do extra large "once off" contributions. Your broker will take care of all that. I normally contribute three years of contribution every three years, Zurich seem happy to get the money, nobody has complained so far anyway.

 

[spiritualseeker1989]

@danyyyy101 Yeah looking at 1.5% with NFS and Goodbody/new Ireland vs .5% with Zurich seems to make it an easy choice. Annoying that I have to talk to people and can't just do it online. Maybe there's a business opportunity there...

 

[danyyyy101]

@spiritualseeker1989 Somebody here in /r/irishpersonalfinance once posted a link to a broker who charges 0.5% AMC to manage a Zurich pension if the contribution was over 10k. They publicly listed their fees on their website, and they were an online only business (basically a person working from home). They were a member of the proper trade body and had the right insurances, so were probably a fairly safe bet to manage your pension.

I have absolutely no idea where to find that link on here, I only remember because they were publicly listing the AMCs they charge by contribution level which saves having to email or ring anybody, and that's unusual in Ireland.

Maybe make a new topic and just ask here and whoever replied last time might reply again to a new topic?

 

[spiritualseeker1989]

@danyyyy101 labrokers? Davyselect?
I also am trying to find someone to set up the "unlimited contributions without BIK" aspect of it. Maybe it's as simple as just asking my company's accountant to pay in?

I honestly HATE calling people and dicking around with smalltalk and having them try to suss out what I'm willing to pay. It's painful. Every time I try to email they want to get on a call so 5 minutes of writing turns in to 30 minutes of pointless yammering.

I am happy to contribute well over 10k. I'd like to put in about 5,000-6,000 per month.

 

[danyyyy101]

@spiritualseeker1989 No it was literally someone working from home out in the country somewhere. Not somewhere big like Davy.

If you're happy to contribute over 50k, why not try getting a 0.5% AMC from my pension broker https://bjrfinancial.ie/. He likes email does Barry John, very rare he rings you which is only when he legally has to, which I like.

Email him on barryjohn@bjrfinancial.ie, tell him Niall told you he might be able to do you a 0.5% AMC on a Zurich pension on a 60k-72k annual contribution. See what he says. Worst he can say is no.

 

[spiritualseeker1989]

@danyyyy101 Thanks! Really appreciate it.

 

[rosyy57]

@spiritualseeker1989

1. Saving 54% in tax and worrying about 1% is where you are at. Yes the fees are high but that’s cause you have a tiny investment fund. If you put in a few hundred k fees go down. A tax free 10% investment with 1% fees is better than a post tax investment with no fees.
2. I’m not gonna comment on fees, it’s your job to shop around. Certainly you can pay less.
3. Retirement amount depends on yourself and is very personal. Not married and with no grand kids? That’s cheaper. Not wanting to travel and enjoy your own company at home? Cheaper again. Bad health now or family history of early death? Shorter life span.
4. SF won’t raid pensions. They might slightly reduce the tax free amount or increase taxes on the income, but again your still paying less tax than if you didn’t use this avenue.
5. Mr money mistache, no idea who this is but sounds like a YouTube influencer or cheesy tv add that wouldn’t resonate in Ireland and hence doesn’t know our tax code. Ignore that nonsense.
6. You run your own business… which is insanely hard. Listen to your accountant. Create many wealth buckets. You’ve done the house bit right. Hopefully the business could be saleable or you could retire and have a new CEO run the business while you get the profits. That’s good. Fill up your pension with the money you used to pay the mortgage with, pre tax. Then as an individual you are finically robust.
7. What happens if you don’t, turn 90 and the business is gone and after all your work, you can’t afford to live. Less likely in your case, but also lifestyle expectations are different. What’s the point in earning money just to pay it as tax willingly and not keep enough for just in case.

 

[spiritualseeker1989]

@rosyy57 Thanks - the 1% (1.25-1.5%) is more on my mind because if returns average 8% that's a ~18% hit, even worse when you consider that it's annual so you're losing any future returns on that money. I'm accustomed to having easy access to a wide array of extremely low-fee index funds (Vanguard etc.) so hearing that 1% is normal is kind of shocking. Seems like a massive ripoff.

MrMoneyMoustache was the originator of the FIRE term and generally advocates saving in simple low-fee index funds and avoiding lifestyle inflation. He's pretty well known. https://en.wikipedia.org/wiki/Mr._Money_Mustache has more. If Ireland didn't have an insanely stupid tax code it would work better here. I do not plan to live in Ireland forever (I'm an immigrant, incidentally).

Upvoted you btw, not sure why you were downvoted.

 

[rosyy57]

@spiritualseeker1989 Why not just invest in a Vanguard fund through the pension fund so. Fees are the same and some of my pension is in Vanguard funds. Also In single stocks which I manage, not recommended but possible.

Ah yes I’ve heard of FIRE, personally have no reason to hate my life or escape from it. Retirement early has no appeal. People tend to age quicker and die when they have no purpose or things to fill their day. I like to enjoy the journey and be sensible but not frugal to the point of cheap.

Sound to me like you’d benefit from a second meeting with a wealth manager. Or maybe this was just a post to plug the website you posted.

Think of it this way. You (and I) probably pay keyman insurance for our roles in business. We hope to not rely on it. But a pension, we’ll definitely use and may have to rely on it.

 

[spiritualseeker1989]

@rosyy57 What the hell are you talking about?

1) I have nothing to do with MrMoneyMoustache. Or maybe I'm plugging wikipedia? TBF it's pretty great.

2) I'm literally here asking if nfs fees are too high so if I'm plugging it I'm doing a shit job

3) There are a lot of reasons to want to save money and enjoy financial freedom that aren't "hating your life"

I didn't know I could invest in Vanguard through said fund though, that's useful to know.

 

[chrisc]

@spiritualseeker1989 Mr. Money Mustache

Mr. Money Mustache is the website and pseudonym of 48-year-old Canadian-born blogger Peter Adeney. Adeney retired from his job as a software engineer in 2005 at age 30 by spending only a small percentage of his annual salary and consistently investing the remainder, primarily in stock market index funds. Adeney lives in Longmont, Colorado, and contends that most middle-class individuals can and should spend less money and own fewer physical possessions. He argues that by doing this, they can live with increased financial freedom and happiness, reducing their environmental footprint in the process.

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[spiritualseeker1989]

Annoyingly I can't seem to verify my phone number to post to discord....

 

[aspiegirl1105]

@spiritualseeker1989 How are future governments going to raid *private* pensions?

They could reduce what people are allowed add tax free in the future (though I doubt it) but that won't make a monkeys to how valuable your contributions today are.

You might as well be worried about them directly sticking their hand directly in your current account.

 

[saddle]

@spiritualseeker1989 Hey robert, can you provide a link to support this :"I read here my limited company should be able to make unlimited pension contributions with no BIK, income limits, etc. in 2023."?

I am in similar boat that i'm thinking in maxxing the pension out for a few years...There was a good article in the times on sunday too about buying property through your pension.

 

[spiritualseeker1989]

@saddle It's discussed in a few places but https://wealthwise.ie/prsa-pension-rules-2023/ is one example