Dear ASKABOUTMONEY members,
I am writing this e-mail as an awareness-raising exercise in relation to the crippling charges imposed on Union members (lecturers, teachers, nurses, gardai, civil servants etc.) through the AVC schemes brokered by pension intermediaries such as (Cornmarket, Marsh Ireland etc.) and managed by life offices such as (e.g. Irish Life, Friends First, Hibernian etc.). The typical charges are as follows:
Let's probe the financial absurdity of the situation that these union members find themselves in, a little further:
Teachers, lecturers, nurses, gardai etc. all over this country are members of unions. The members pay a subscription to its union to act in the “best interest” of its members. Through some "tendering process", these unions then go and award the AVC business of all its members to a financial intermediary (like Cornmarket, Marsh Ireland etc.) who, between the intermediary and the fund manager, typically take 5 % of all regular and once-off contributions from the member, on top of a 1% annual management charge.
In my view, this is a financial scandal and I don’t think I am over-reacting. Why? Because these same members could access the same investment funds by taking out a standalone PRSA AVC privately through any number of discount brokers who will set up the scheme with a fund manager on a nil commission basis (e.g. LA Brokers, LD Ferguson & Associates etc.). 100% of the member’s funds are invested. The discount broker gets a finder’s fee from the life office based on volume and consistency of business pushed through. This is paid for from the profits of the life office.
The only major disadvantage that I can think of to members in taking out a PRSA AVC privately, is in having to set up a direct debit and pay from net salary. Tax relief then needs to be claimed by the individual afterwards (arranging with Revenue to increase Credits and organising PRSI relief through Dept. of Social Welfare)
Public sector unions are responsible for awarding large captive markets to various financial intermediaries. In doing so, it should have ensured that the latter did its utmost to use the buying power to drive down the charges so that people within these schemes would be getting a better deal than those outside it. Instead, the opposite is the case – it is truly quite astonishing.
In writing this, I hope that lecturing staff, technical staff, administration staff, nurses, gardai etc. and other public servants who have chosen the AVC route to pension top-up slowly begin to realise that they are no longer tied to these grossly uncompetitive and highly restrictive monopolies. I fear though, that those who are aware are in relatively small numbers.
Regards,
Auburn
I am writing this e-mail as an awareness-raising exercise in relation to the crippling charges imposed on Union members (lecturers, teachers, nurses, gardai, civil servants etc.) through the AVC schemes brokered by pension intermediaries such as (Cornmarket, Marsh Ireland etc.) and managed by life offices such as (e.g. Irish Life, Friends First, Hibernian etc.). The typical charges are as follows:
- 95 % allocation rate (i.e. only €95 out of every €100 contributed is invested)
- 1 per cent (minimum) annual management charge
Let's probe the financial absurdity of the situation that these union members find themselves in, a little further:
Teachers, lecturers, nurses, gardai etc. all over this country are members of unions. The members pay a subscription to its union to act in the “best interest” of its members. Through some "tendering process", these unions then go and award the AVC business of all its members to a financial intermediary (like Cornmarket, Marsh Ireland etc.) who, between the intermediary and the fund manager, typically take 5 % of all regular and once-off contributions from the member, on top of a 1% annual management charge.
In my view, this is a financial scandal and I don’t think I am over-reacting. Why? Because these same members could access the same investment funds by taking out a standalone PRSA AVC privately through any number of discount brokers who will set up the scheme with a fund manager on a nil commission basis (e.g. LA Brokers, LD Ferguson & Associates etc.). 100% of the member’s funds are invested. The discount broker gets a finder’s fee from the life office based on volume and consistency of business pushed through. This is paid for from the profits of the life office.
The only major disadvantage that I can think of to members in taking out a PRSA AVC privately, is in having to set up a direct debit and pay from net salary. Tax relief then needs to be claimed by the individual afterwards (arranging with Revenue to increase Credits and organising PRSI relief through Dept. of Social Welfare)
Public sector unions are responsible for awarding large captive markets to various financial intermediaries. In doing so, it should have ensured that the latter did its utmost to use the buying power to drive down the charges so that people within these schemes would be getting a better deal than those outside it. Instead, the opposite is the case – it is truly quite astonishing.
In writing this, I hope that lecturing staff, technical staff, administration staff, nurses, gardai etc. and other public servants who have chosen the AVC route to pension top-up slowly begin to realise that they are no longer tied to these grossly uncompetitive and highly restrictive monopolies. I fear though, that those who are aware are in relatively small numbers.
Regards,
Auburn
