Buy Out Bonds Query

Discussion in 'Pensions' started by InfoSeeker, Aug 7, 2018.

  1. InfoSeeker

    InfoSeeker Frequent Poster

    Posts:
    451
    My OH has a pension circa 100K with a previous employer and recently received a Statement of Options.

    In her next job there is no pension set up as it is a small operation so transferring it to a current pension is not an option.

    Options seem to be leave it in current setup or move it to a buy out bond. I have read other threads on this area and I think moving it to a buy out bond is the best option.

    My query is not really which investment option to select but how to suss out all the charges that apply and to compare them. For example looking at Irish Life they are set out clearly though if you want to invest in Diversified Funds then it states the following so to me it seems they can add whatever charges they want so I would avoid it.

    My OH has 25 years to retirement so for now it would be a medium to high risk investment so was wondering if anyone else has recently gone down this road & could give me any tips.

    The cost of using these specialist managers is deducted from the fund performance and is in addition to Irish Life’s annual
    management charge of 0.75%. These figures are for illustration purposes and will vary in the future depending upon changes in the asset mixes of the
    funds, any performance bonuses paid or appointment of different external managers.
     
  2. SBarrett

    SBarrett Frequent Poster

    Posts:
    2,574
    An advisor should make all charges clear to you up front before you make any investment decision. Not sure on the reporting requirements of a tied agent as I have never worked as one.

    The allocation rate (how much of the €100k is invested) and the amc can vary as each life company offers a number of different contracts. The ones with the higher allocation rate (can be taken by the advisor as the set up fee or added to the policy) will result in a higher amc as the insurance company has to recoup the money they have paid out.


    Steven
    www.bluewaterfp.ie
     
  3. InfoSeeker

    InfoSeeker Frequent Poster

    Posts:
    451
    Thanks for the reply Steven.

    I am planning on completing this myself so was just doing some research into what is involved. I will touch base with one of the providers for buy out bonds once I confirm that the charges are fairly consistent across the life companies for similar type investment options, i.e. those that fall into a medium\high risk profile.
     
  4. SBarrett

    SBarrett Frequent Poster

    Posts:
    2,574
    The charges don't vary per fund, they vary per contract.

    Insurance companies don't sell directly to consumers. If you go directly to an insurance company, you get someone from their direct sales team and they get paid.


    Steven
    www.bluewaterfp.ie
     
  5. InfoSeeker

    InfoSeeker Frequent Poster

    Posts:
    451
    I don't completely understand the process so apologies if these are stupid questions.

    As an example, I have 100K in an existing pension though I no longer work with the company so I cannot contribute to it going forward. I am 40 years old and do not plan to need access to these funds early at say 50 so I am looking at the long term to 65, etc. I want to allocate all 100K and will likely choose 2 different fund options.

    So I work out which 2 funds I want to allocate this to, say a 50/50 split and I ring them, they put me through to Sales and I purchase the 2 funds. I expect an annual charge and can see this in the documentation, are there usually extra charges?

    I was assuming that if I was to engage a financial advisor it would be for that person to use their knowledge to help me select how the 100K should be invested?
     
  6. SBarrett

    SBarrett Frequent Poster

    Posts:
    2,574
    That's it.

    Setting up a buy out bond involves a lot of paperwork as well as advice on investment strategy. If you phoned Irish Life, you would get their direct sales team who would put you in one of the MAPS funds.


    Steven
    www.bluewaterfp.ie
     
  7. LDFerguson

    LDFerguson Frequent Poster

    Posts:
    4,017
    The point comes up regularly but it's worth repeating. Although it might seem counter-intuitive, you won't get lower charges by going directly to a pension company than by going to a broker. In many cases, the opposite will be true. If you go directly to a pension company you will be put through to one of their direct sales staff, who will receive commission instead of a broker receiving commission. In addition, pension companies obtain the bulk of their business from brokers, not by direct sales. So no pension company wants to risk messing with their biggest sales channel - brokers - by competing aggressively with them or undercutting them.

    It's also worth noting that pension companies offer brokers a wide variety of charging options for pension business. So a broker that keeps their overheads low can choose to offer lower-charge products than a direct sales employee of a pension company who may not have authority to offer variations on charges and may well be under the pressure of sales targets.

    In the interests of full disclosure, I'm a broker, but I did start my career working for a pension company so I've been on both sides of the fence.

    Regards,

    Liam
    http://ferga.com
     
    SBarrett likes this.
  8. SBarrett

    SBarrett Frequent Poster

    Posts:
    2,574
    Nike don't sell directly to the consumer, as it will ruin all the retail stores that buy their products.

    What they do is have their own online/retail store, that only offers Nike products. The gear in the Nike store isn't sold at wholesale price, it is marked up to retail price like all the others. Or you could go to Lifestyle Sports where you can also buy Adidas, Under Armour or whatever suits you best.


    Steven
    www.bluewaterfp.ie
     
    LDFerguson likes this.
  9. InfoSeeker

    InfoSeeker Frequent Poster

    Posts:
    451
    I appreciate the replies and for breaking it down for me. I will look up pension brokers in the Cork region as that is where I am based unless it is possible to complete this advice over a call then I would prefer to contact one of ye as both of you consistent give very good advice. If that is possible please PM me.