New KBC PRSA Pension Products Major On Self-Serve Capability
KBC Bank launched into pension provision this year, leveraging off the bank’s digital expertise. The pension offering marks KBC Ireland’s transition into bancassurance i.e. combining a banking and insurance offering for customers. Headquartered in Belgium, KBC Group is long established in the life and pensions business in other countries across Europe.
The KBC pension products are portable Personal Retirement Savings Accounts. PRSAs are the preferred pension savings vehicle for employees and self-employed individuals who do not belong to company pension schemes, and there are currently c.300,000 PRSA contracts, according to the Pensions Authority.
The KBC PRSAs are operated through the KBC mobile app, with the option to increase, decrease or pause contributions while reviewing their fund performance in real-time. “This self-serve capability is unique to the Irish market and will allow customers to track their progress against their own retirement goals,” explains John Gethin, Branch Manager, KBC Life and Pensions.
There are two types of PRSAs: standard contracts and non-standard contracts. The latter provide savers with a wider choice of investment fund options but the charges are higher than for standard PRSAs, which account for 75% of the market.
The standard KBC Lifestyle PRSA has a default investment strategy, ‘MyAutoinvest’, that alters as the saver approaches retirement age. Under this strategy, the younger the saver the higher the allocation of savings to equities, which have the most potential for growth. The older the customer, the larger the allocation to less volatile bonds and cash.
The KBC Lifestyle Extra PRSA, launching in October, is KBC’s nonstandard PRSA, with a choice of eight funds designed for individuals who want more choice. KBC says that its ‘ExpertEase’ range of funds aims to provide the optimum balance between upside potential and risk of loss, to ensure the investor feels as comfortable as possible under all market conditions.
Gethin adds that through the testing phase, KBC found that one of the most important decisions for customers is saving for retirement – not choosing an investment fund. “We know that customers can find pensions confusing and this can negatively affect retirement planning, which is why we’ve simplified the decision-making process.
“Coupled with the ExpertEase investment strategy, we have also introduced a new in-app risk profiler that goes beyond just assessing a customer’s attitude to risk and reward. We also take into account the customer’s tolerance to loss. Knowing how someone feels about loss allows us to hopefully keep them within their investment comfort zone.”
The minimum commitment is €25 per month or €300 per year with the option to make once-off top-ups coupled with pause and resume functionality.
The KBC Lifestyle PRSA fees are 2.5% for each contribution made and an 0.9% annual fund management fee. For the non-standard Lifestyle Extra PRSA, the contribution fee is 2.5% and the annual charge ranges from 0.50% to 1.45% depending on the selected fund.
Twenty and thirtysomethings outside a company pension plan tend to long-finger pension commitments. Gethin reminds such individuals that unless you plan on working for the rest of your life, one day your pension will likely be your only source of income.
“It’s really important that you plan ahead now so you have income when you’re no longer working,” he adds. “Post-retirement you could have to survive on your pension for 20 years or more, so relying on the annual State pension (currently c.€12,900) could leave you financially vulnerable.
“Setting up a pension now can be the difference between just surviving and enjoying your retirement. Pension plan contributions are generally eligible for tax relief as decided by Revenue and, unlike a savings account, you can’t dip into a pension plan on a rainy day. Therefore it helps to secure your future.”