Caveat Emptor – How you can avoid pitfalls when choosing a pension product

I am sure you have heard all the reasons before why contributing to a pension is so important. You already know that you require a sizeable pension fund in order to retire comfortably. You also know that the government is providing you with generous tax breaks when making pension contributions. However, ensuring that you maximise your pension tax relief and choosing the right pension product is the tricky part. So, here are a few pointers:

You should firstly ensure that you make the most of your entitled pension tax relief.

As a GP you will most likely have two sources of income, GMS and private income. You therefore may have a number of options available to you to maximise your pension benefits at retirement while making the most of the tax advantages of retirement planning.

Additional Voluntary Contributions (AVCs) or stand-alone PRSA AVC contributions can be used to enrich your retirement pot as well as optimise your tax relief.

For a working example, please click here:

It is absolutely vital that your accountant makes the correct calculations in relation to the AVC contributions which will attract tax relief. If your accountant has any pension-related queries we are very happy to talk to him/her.

Secondly, you need to be aware of the fact that the Irish pension landscape is hugely complex, so choosing the right pension provider and/or product is important.

Please note that as a GP you do not have to make your AVC contributions to the GMS scheme directly. Contributions to a stand-alone PRSA AVC, for example, can be a very attractive option in that they offer:

1. full transparency on charges.

2. flexibility on contribution amounts. You can change the premium amount on an ad-hoc basis.

3. choice of investment funds. You will have a greater range of investment options.

4. diversification. You do not have all your eggs in one basket.

The majority of the Irish-based life companies offer AVC and PRSA AVC products which are similar in nature, however, their fund choices and investment managers differ. In addition, a variety of platforms have now been introduced to the Irish market offering similar products as traditional life companies but with a wider fund choice, making the pension landscape even more confusing to the consumer.

Thirdly, look at where your pension plan should be invested. There is an overabundance of investment options available. Your investment choice should reflect your time to retirement and attitude to risk. Here in IMO FS, we spend a considerable time gathering all relevant personal as well as financial data and completing a risk questionnaire in order to ascertain the client’s risk/return profile. Please note that our financial reviews are free of charge.

Last but not least, be aware of charges! Charges can seriously reduce the size of your pension pot. The more sophisticated the product looks and the bigger the fund choice, the more likely it is to be more expensive. If you are currently considering investing into a bespoke product/platform and would like our professional advice, please do not hesitate to contact us and we will be happy to evaluate the product. If you have lots of pensions with different providers, you should consider the option of consolidating them in order to reduce charges such as policy fees. Before doing so we would strongly recommend you talk to us to ensure that this makes financial sense.

If you have any queries in relation to this communique or indeed wish to speak to one of our financial advisers, please call us on 01/6618299 or email us on imofs@imo.ie.