ARF Charges - did anything come out of these submisions?

[monagt]

"Two things in particular concern me re pension proposals.

Given that it is very foolish for all not to make pension provisions, pension providers have a captive consumer. This consumer needs protection from the following which is quite common.
For mathematical simplicity say I have a pension fund of €100,000.
The provider managing this fund imposes an annual charge of say 1.5% of the total fund.
Consider a year in which the fund has grown by 3%. Total Value €103,000.
Management charge @ 1.5% €1545 which is over 50% of the growth!
Consider a year in which the fund falls by 3%. Total value € 97,000.

Management charge @ 1.5% €1455 which is only €90 less than before.

1. Why should the provider be rewarded for losing money?
2. With only €90 of a difference there is little incentive for the provider to manage more efficiently.
3. The link between management charge and total fund should be broken.
4. If the charge on Standard PRSAs can be prescribed why not the same here?"

 

[czechmate]

"Two things in particular concern me re pension proposals.

Given that it is very foolish for all not to make pension provisions, pension providers have a captive consumer. This consumer needs protection from the following which is quite common.
For mathematical simplicity say I have a pension fund of €100,000.
The provider managing this fund imposes an annual charge of say 1.5% of the total fund.
Consider a year in which the fund has grown by 3%. Total Value €103,000.
Management charge @ 1.5% €1545 which is over 50% of the growth!
Consider a year in which the fund falls by 3%. Total value € 97,000.




Management charge @ 1.5% €1455 which is only €90 less than before.

1. Why should the provider be rewarded for losing money?
2. With only €90 of a difference there is little incentive for the provider to manage more efficiently.
3. The link between management charge and total fund should be broken.
4. If the charge on Standard PRSAs can be prescribed why not the same here?"

You should consider the following ideas...

the charges cover a lot more than simply investing your money e.g. they have to employ people to answer your queries. The charges typically also cover the cost of your broker etc. If you don't want to pay for any advice then that's a different matter but that could be a false saving.

you have to consider that if you choose anything riskier than a bank deposit then you can lose money. This has nothing to do with the provider.

it seems reasonable that the provider should have some incentive to make you more money, and some disincentive against underperforming. You don't seem to want this, as you suggest a break between fund and charge. I don't think this would be a good thing as then you pay a fixed fee regardless of performance. Perhaps what you really want is that the rewards for good performance are much greater than they are currently, and vice versa for poor performance. But if markets go up 20%, are you happy for your fees to go up, say, 40%?

the prescribed charge on a standard prsa is a percentage of fund already.

 

[monagt]

the prescribed charge on a standard prsa is a percentage of fund already
ARF I was discussing.
Also, Funds in the USA are now moving towards performance payments.

If the Fund loses money then reducedcharge, Profit = Higher charge.