4 questions to ask before you sign up
There are several reasons to consider starting a PRSA with your local bank. Starting a pension is a good move no matter how you do it.
But before you sign up to a pension with an Irish bank, here are four questions to ask.
1. Is a one-size-fits-all approach right for you?
All of the banks in Ireland are exclusive sales agents for a single pension provider.
For example, if you use Bank of Ireland, they will only offer you a pension with New Ireland Assurance (they actually own this business).
Here is the list of pension providers used by each bank in Ireland:
AIB use Irish Life
Bank of Ireland use New Ireland
KBC don’t do pensions (but they use Irish Life for life assurance)
Permanent TSB use Irish Life
Ulster Bank use Irish Life
There’s nothing wrong in itself with using just one provider – especially if you like Irish Life! But it means that you are being offered a very limited set of choices to begin with.
2. When will you see them again?
A pension is not just for this year – it’s for life. But with bank branch closures and staff changes, you probably need to be okay with the fact that you won’t have an ongoing relationship with a pension specialist.
What’s more, many Irish banks no longer have the financial advisor teams they once had. So it’s hard to be confident you’ll be able to obtain financial advice on your pension when you need it.
That could have long-term costs when it comes to taking decisions on future contributions and investment choice – not to mention guidance on how to draw your pension when you retire.
3. PRSAs are not the only show in town
There are several alternatives to PRSAs – and they often offer wider fund choice and cheaper charges.
So rather than selecting an off-the-shelf pension product from your bank, it’s worth speaking with a pensions advisor such as Moneycube. We can help you consider if, for example, a personal pension, or an executive pension is more appropriate for your requirements.
4. PRSAs from Irish banks are usually the most expensive you can get
A PRSA from an Irish bank is usually the most expensive PRSA you can buy.
By law, charges for standard PRSA are capped. Firstly, you cannot be hit with a ‘contribution charge’ of more than 5% of the money you pay in. For example, if you pay in €100, then at least €95 must be invested in your name. Secondly, the ongoing annual charge can’t be more than 1%.
Guess what the banks charge?
Yep, it’s the pretty much the maximum possible. We’ve summarised the costs on the table below.
It’s fair to say the banks do reduce these costs a little for bigger funds. But it won’t rock your world. For example, if your fund is over €150,000, an Ulster Bank PRSA will cut their annual management charge from €1,500 to €1,425.
So should you take out a PRSA with your local bank?
From the perspective of choice, longevity, and cost, it’s worth thinking twice before you take out a PRSA with your bank. We’d love to chat before you do – click here to get in touch.