Duke of Marmalade
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If the PRIIPS risk ratings are what is being referred to here, these are they:AE Bill said:(3) Subject to subsection (7), the risk levels for the purposes of this Part are:
(a) the higher risk level, consisting of AE provider schemes with a risk rating of 5, 6
or 7;
(b) the medium risk level, consisting of AE provider schemes with a risk rating of 3
or 4;
(c) the lower risk level, consisting of AE provider schemes with a risk rating of 1 or
…
(4) Where subsection (2) does not apply [that is where the punter did not choose a risk level as over 95% do not in the UK], the appropriate risk level, subject to
subsection (5), is:
(a) where the period before the participant reaches pensionable age is more than 15
years, the higher risk level;
(b) where that period is 15 years or less, but more than 5 years, the medium risk
level;
(c) where that period is 5 years or less, the lower risk level
Thanks, @Itchy I've been feeling down today, starting to fear that they'll finally succeed in burying my proposal for good. Your comment has cheered me up a bit. It would be great if you and people of like mind could do all you can to get what you nicely call "respectful analysis".Colm's idea deserves a more thorough and respectful analysis.
I'd say not alone will the fee start out higher than their 0.5% goal, it will also go up in time once they realise the liability to the Exhequeuer is only going one wayYou don't have to be a rocket scientist to work out that it will be impossible for the Irish scheme ever to break even at 0.5%. Is the government prepared to keep funding this as a loss-making venture forever? Would the EU allow it (unfair competition with private sector)? Do they plan to increase the charge beyond the proposed 0.5% in order to show that it will eventually wash its face? If so, then will they have to increase the contribution rate from 14%, which is the required contribution for an "adequate" pension assuming a management charge of 0.5%? The required contribution for an adequate pension will obviously be higher if the management charge is higher.
Am I misunderstanding what's intended?
As far as I can see, there is no indication as to whether the charge will be 0.5% or higher.
Investment management fees are a minor element of the costs. 15bps is oft quoted as typical. The real costs, especially for this universal scheme, will be adminsitering all the employers and contributors as they opt in and out and switch around jobs etc.I understand why there will be losses initially, as the funds will be small.
But after a few years, with 500,000+ members, surely 0.50% AMC is plenty?
I see many Vanguard funds with expenses ratios of about 0.10%:
View attachment 8729
Table of Retirement Pots | ||
Age | AE/EY | Colm |
23 | €889,995 | €980,472 |
24 | €838,577 | €923,401 |
25 | €789,630 | €869,079 |
26 | €743,042 | €817,381 |
27 | €698,707 | €768,189 |
28 | €656,523 | €721,391 |
29 | €616,393 | €676,876 |
30 | €578,224 | €634,542 |
31 | €541,926 | €594,290 |
32 | €507,415 | €556,024 |
33 | €474,609 | €519,655 |
34 | €443,430 | €485,096 |
35 | €413,805 | €452,263 |
36 | €385,662 | €421,079 |
37 | €358,933 | €391,467 |
38 | €333,554 | €363,355 |
39 | €309,462 | €336,675 |
40 | €286,598 | €311,360 |
Below is what the Bill actually says. So still a lot of clarity needed. I wonder what EY assumed in their calculations. (By the way, the Bill certainly piles a lot of further work for the Minister. He or she will be kept very busyIf the PRIIPS risk ratings are what is being referred to here, these are they:
View attachment 8715
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