AVC charges

P

POC

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I'm a public sector worker, already purchasing Notional Service. I want to start AVCs to maximise tax relief on pension contributions. I expect to use part of it to maximise my lump sum if/ when I retire early - and for the rest to go into an ARF.
It sounds like the payroll dept already have arrangements in place for AVCs with New Ireland and Cornmarket (I'm a union member).
What should I be expecting as AVC charges and fees? Will I be obliged to pay for expensive advice?
I would really like the convenience of getting tax relief through my salary, rather than having to apply for it afterwards if I get a PRSA instead. But I would consider a PRSA if it is a better or more cost effective option.
Any tips, or links to relevant information, would be greatly appreciated.
Thanks!
 
The benefit of availing of the "net pay" facility is worth something.
In terms of AVC charges, they mainly fall into two categories:
- the annual management charge: ideally you should be looking for a charge of 0.75% pa, but not more than 1% pa. Over time, the amc is the most important charge.
- the upfront charge: this can vary up to 5% of each contribution, but mostly will tend to be circa 2%.

Some providers will seek to charge a higher amc on the basis that they are sharing part with the advisor. The upfront charge tends to be source of paying commission to the advisor. Some products will have no upfront charge (ie 100% allocation) but with a higher amc, say 1% or 1.25%.

Personally I would focus on getting the lowest possible amc.

Ask the Advisor to clearly outline the charges.
 
That is very helpful thanks! Is there usually an initial set up fee as well?
 
If they are charging you a commission, you shouldn't be paying a set up fee!

I think Cornmarket work on commission structures so expect there to be a premium charge ie for every €100 you contribute, €95 or €98 will be invested. I would bet the management fee would be 1%.

If you want to have 100% of your money invested and a lower AMC, you will have to go outside the Cornmarket structures. That would mean claiming the tax relief on your premiums from the Revenue yourself.


Steven
www.bluewaterfp.ie
 
Hi Steven, what's better a PRSA or an AVC - or are they the same thing!

Is there much variation in AVC charges?
 
An AVC is run by the administrators of the scheme.

If you want to do your own thing, it goes into a PRSA AVC. It is still linked to the main scheme (you have to provided details of the scheme to the PRSA provider) but you can choose the provider and the funds.

The charges of an AVC scheme should be the same as the main scheme.

The charges for a PRSA AVC depend. A standard PRSA AVC has a maximum charge of 1% amc and 5% contribution charge. A non standard PRSA AVC can have higher or lower charges and will have a greater fund choice too. (confused yet? I am writing it! o_O)


Steven
www.bluewaterfp.ie
 
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