Advice needed on moving PRSA

[Fortune]

You hold it long enough and eventually you make money.

That's only the case of they have a sufficiently large book that can cover their fixed costs to allow for these marginal pricing cases.

 

[Steven Barrett]

It just depends on what their business strategy is. Are they in the business for the long term or do they just want to cherry-pick. Latter, to me, is a short-term strategy.

If the value goes above €100,000, the price of the Standard Life contract goes down by 0.5%, that is the long term strategy. Many of the self directed PRSA providers have tiered pricing structures based on AUM.

It is a calculated risk by RL to offer such low amc for all contracts. It benefits consumers alright, not sure how it will work out for RL in the long term.

 

[blackdog]

. You hold it long enough and eventually you make money. Alas, not everyone has the patience for the long game

These insurers are required by regulation to hold capital to ensure they can administer their contracts out to the policyholders retirement date in loads of different severe scenarios. That capital has to be raised on equity markets where shareholders expect double digit returns and then tied up over long periods in cash type assets that earn negligible return. In other words, for an insurer, it's not just sell a contract and bank the charges immediately.

This may help to explain some market trends. Regulation brings benefits, but at a cost.

 

[gaelic_oc]

A €100 a month PRSA at 0.4% earns them €4.80 a year

I think there are basically two ways it could go:

A) Royal London bet that some/many clients will eventually bump up their contributions, and over the course of a decade or two will accumulate €100,000+, which means they could earn €400+ per year from each of those clients. They could also then count on low customer attrition (no better deal to be had). So eventually, they accumulate a very big chunk of the market, say 100,000 clients paying €400 each = €40 million per year.

B) They jack up their fees at some point

 

[ClubMan]

B) They jack up their fees at some point

For new business? Isn't the AMC quoted when taking out a policy binding?

If they wanted to cut costs/boost profits then the first thing that they would probably do is withdraw or zero rate the discretionary ValueShare bonus?

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