Discount/execution-only pension options

SBarrett said:
The AMC is made up of three parts:

1. Costs of running a life insurance company - staff wages, light & heat etc
2. Broker commission/ allocation rates - we see this with options where there is an allocation rate of 105%, the base amc is 1%. Where the allocation rate is 100%, the base amc may be 0.4% or 0.5%.
3. Profit


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
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Apologies for jumping into this thread. I've been wondering if the AMC is the full charge and I'm guessing not.
I'm looking at a KIDD document at the moment on a recommended fund where they mention a number of charges including a once off entry fee of 0.93%, ongoing annual portfolio costs(or impact on return as its described) are 1.83% plus transaction costs of .09%
The annual charge I was quoted was 1%.
So is my annual charge the 1% AMC or this 1% plus the 1.83% +.09%.
To me impact on return and charge/fee are the same
Thanks
 
plantrepair said:
Apologies for jumping into this thread. I've been wondering if the AMC is the full charge and I'm guessing not.
I'm looking at a KIDD document at the moment on a recommended fund where they mention a number of charges including a once off entry fee of 0.93%, ongoing annual portfolio costs(or impact on return as its described) are 1.83% plus transaction costs of .09%
The annual charge I was quoted was 1%.
So is my annual charge the 1% AMC or this 1% plus the 1.83% +.09%.
To me impact on return and charge/fee are the same
Thanks
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Not sure what provider/KIDD you're looking at, but for my Zurich pension they mentioned at setup time to "please note Zurich offers additional 'external funds' managed by outside fund managers which accrue an additional management charge". So in your example I'd imagine the 1.83%+0.09% is charged within the fund, then an additional 1% is charged by your pension provider.
 
Wonder if somebody can help explain this for me? I came across it while looking through old emails when setting up the pension I discussed in this thread (a Zurich EPP) -
"The annual fund management charge applicable is 0.75% as follows - 0.4% is deducted in the price declared, therefore the declared unit price is the bid price after this 0.4% deduction. The additional 0.35% is deducted by way of cancellation of units. Please note there is no bid/offer spread."

I can see that the 0.35% cancellation of units will in-effect take 0.35% out of my pension pot each year, makes sense. The 0.4% deducted from the price declared though, this sounds like it would only impact you when you buy/sell rather than being a further 0.4% hit on your pot each year, or what am I missing?

Thanks!
 
The 0.4% is deducted from unit price each month before declaring. So the unit price is net of the ongoing 0.4% each year.
The 0.35% charge is deducted by actually encasing units, ie reducing the number of units.
Overall the net effect is a charge of 0.75% pa.
 
Zenith63 said:
The 0.4% deducted from the price declared though, this sounds like it would only impact you when you buy/sell rather than being a further 0.4% hit on your pot each year, or what am I missing?
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Simplified example - let's say the assets within the fund grow by 4% in value in a given year. The unit price of the fund will go up by 3.6% per year. So it doesn't only hit you when you sell.

The reason for this system is that Zurich Life have plenty of different charging structures available for different products. For individual customers, their standard annual charges range from 0.5%, through your 0.75% to over 1% for some. This allows them to use the same fund for all contracts, regardless of charging on the contract. So on yours they take 0.4% out of the fund and 0.35% out of your specific policy. If you were in a contract with a 1% overall annual charge, they would get their 0.4% from the fund and an additional 0.6% from the individual policy.

Hope that makes sense.

Regards,

Liam
www.ferga.com
 
LDFerguson said:
This allows them to use the same fund for all contracts, regardless of charging on the contract. So on yours they take 0.4% out of the fund and 0.35% out of your specific policy. If you were in a contract with a 1% overall annual charge, they would get their 0.4% from the fund and an additional 0.6% from the individual policy.
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So with a 1% AMC 0.4% is deducted from the fund value and 0.6% is deducted by cancelling units. Do you know when this occurs or the mechanics of how it is done ?
So if on january 1 2025 if I hold 100 units of Zurich international fund 0.6% of my units will be cancelled to pay the AMC over the year so therefore
on January 1 2026 I now hold 99.4 units (100 units - 0.6 units) is that correct ?
 
FWIW AI suggests that there are different approaches to the frequency and mechanism.
1. How the Deduction is Taken

Providers use a few different methods to deduct the AMC/FMC, often acting on a daily or monthly basis:
  • Unit Price Adjustment: The provider reduces the unit price of your fund on a daily basis to reflect the management fee. You will not see this on your statement as a transaction, but rather in a lower fund value.
  • Unit Cancellation: The company cancels a specific number of units in your fund equivalent to the fee amount, typically on a monthly basis.
  • Combination: Some companies take part of the fee by reducing the unit price and another part through unit cancellation.
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ClubMan said:
I thought that it was often done on a daily basis at a rate of AMC/365 by encashing units to pay the pro-rata charge?
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Its still hard to get a definitive answer though , I just notice that the number of units does reduce over time . Is there any way of getting a statement or a calculation of how this is carried out? Even to get a historic unit price of a fund over time like a share price I cannot find on the Zurich life site. All they show is the performance of the fund in percentages over different time frames. It would be informative to be also able to look up the unit price of the fund aswell to ensure that mistakes are not being made.
 
joe sod said:
Its still hard to get a definitive answer though , I just notice that the number of units does reduce over time . Is there any way of getting a statement or a calculation of how this is carried out? Even to get a historic unit price of a fund over time like a share price I cannot find on the Zurich life site. All they show is the performance of the fund in percentages over different time frames. It would be informative to be also able to look up the unit price of the fund aswell to ensure that mistakes are not being made.
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What's your issue here? If you want to know what your pension provider's mechanism is for how and when they levy the Annual Management Charge/Fund Management Charge then just ask them?
 
ClubMan said:
FWIW AI suggests that there are different approaches to the frequency and mechanism.
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@ClubMan (and his AI) are correct. There is no standardised method for collecting policy charges across the industry. Different companies use different approaches and I've seen that some companies use different methods for different types of policy. So if you have a query about a specific policy, the only way to find out is to ask the provider company to tell you exactly which method (or combination of methods) they use to collect the charges on your policy.
 
@LDFerguson you had a very good explanation in 2019 of how zurich charges the amc, if it was the case that 0.6% of the charge was taken by extinguishing units then logically am i correct in my calculation that every year I should have 0.6% less units than i had a year before if i had not made any subsequent lodgements to the fund?

People like yourself are very knowledgable on this, its very difficult to get this sort of detail if you just ring up the call centre, you would know more than most you get by phoning the call centre.

Also does the financial regulator check that they are indeed doing these calculations and deductions correctly?
 
joe sod said:
if it was the case that 0.6% of the charge was taken by extinguishing units then logically am i correct in my calculation that every year I should have 0.6% less units than i had a year before if i had not made any subsequent lodgements to the fund?
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You should have less units to the value of 0.6% of your fund, at the end of the year. To take the example of Zurich Life, last time I checked they made the deductions monthly, so the deduction in units each month would be (0.6% x fund value / 12).
 
If this isn't just an academic question and you have concerns and evidence that your pension provider/underwriter isn't applying charges correctly then you should contact them and query this, get them to deal with it, and, if necessary, make a formal complaint to them and get a final response letter from them if they don't deal with it to your satisfaction and then make a complaint to the FSPO.
www.fspo.ie

Submit a Complaint | FSPO Complaint Process | Financial Services and Pensions Ombudsman (FSPO) | Ireland

Learn how to submit a complaint to the FSPO, including steps, time limits, and necessary documentation for financial and pension disputes.
www.fspo.ie
Even if it is just an academic question then you can write to your pension provider/underwriter and ask them to explain how and when charges are levied.
 
Many years ago I had AVCs from my occupational pension through Canada Life. Canada Life announced reduced charges and seemed to apply these for a period. I then noticed extra charges being applied. I complained and received detailed monthly printouts of the charges. Canada Life then admitted that the original charges were mistakingly reapplied. I received full refunds and lost investment gains
I also received a goodwill gesture from Canada Life to exempt me from their monthly policy fee for life. All other members of the AVC scheme also received refunds.

A few years later I noticed the monthly policy fee was being reapplied. A letter to the chief executive of Canada Life cured this second 'mistake'.
 
Coincidentally I received a letter from Aviva recently telling me that some mistake was made with the charges on my Personal Pension Plan and they were adding the value back to my policy. It was only €100 or something like that so I didn't really pay much attention to it. Years ago I probably would have gone all forensic on it. These days I don't have the energy or curiosity. :D
 
ClubMan said:
Coincidentally I received a letter from Aviva recently telling me that some mistake was made with the charges on my Personal Pension Plan and they were adding the value back to my policy. It was only €100 or something like that so I didn't really pay much attention to it. Years ago I probably would have gone all forensic on it. These days I don't have the energy or curiosity. :D
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