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Old 07.11.2015, 12:46
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Differences between insurance and 'classical' 3a pension schemes

Hi all,

I'd like to pay into a 3a scheme this year. It's my first time to do this and hence I'm looking for some advice.

I have been recommended an insurance based product which does look quite reasonable, although I was a little surprised to see an insurance vehicle as the basis for pension investing.

I am quite aware that bundling is a straightforward way to hide fees; also I believe that insurance is often mispriced as the buyer usually does not know how to price it. For these reasons this structure does set off some alarm bells in my head.

That said, the scheme looks quite attractive with significantly higher (claimed) returns, linked to SMI (with some downside protection), than the basic savings types schemes listed on comparis (currently yielding 1% or less pa) as far as I can see. It also offers some flexibility which is nice.

I did a little digging on EF and could not find any clear comparison between the insurance approach and the more standard pension saving approach. I did note a couple of people saying that keeping them separate is a good idea.

It seems to me that these are somehow two quite different classes of products, so I was wondering what are the pros/cons of each of these different solutions.

Any pointers appreciated.

Sean.
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Old 07.11.2015, 15:57
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Re: Differences between insurance and 'classical' 3a pension schemes

It really depends on the context whether or not a particular product is suitable for a person or not. I suggest you look at your total situation first and then seek a product to bridge the gaps.

A primary reason for picking an insurance type product for the third pillar is that if through illness or accident you become unable to pay it going forward it will still continue to accumulate until retirement, so your objective of having savings for retirement would be met. If however your invalidity income would be sufficient for you to continue saving it might not be so attractive and so on.
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