Invisibility of Management Fees to the Investor/Pensioner?

[Villaines]

I took the time to look at a DC pension pot that I have with a former (large) employer. I am a deferred pensioner for the purposes of that fund but now employed elsewhere. The pot is siting there, and will for a while yet, because the AMC is a seemingly decent 0.32%, which is lower than that which my current employer negotiated on a similar fund placed with the same invetsment manager (0.40%). However, these rates are only shown on the generic Investment Fund information sheets provided by the investment maanger to the employer. Any personal statements I get of my pension account balance just show the change in the value of the fund, with no detail whatsoever on the AMC deducted.

Indeed, I noted that the units I hold in the previous employer fund hadn't changed since I left the previous employer. I then checked in with the penion investment manager as to how they deduct their AMC, and I was told that it is charged directly to the fund itself, so that's why my units don't change. Yet, this only makes sense to me if all unitholders are subject to the same % AMC.

This got me wondering then about non-pension investment funds, PRSAs and ARFs where the individual might be able to negotiate a higher or lower AMC depending on the broker they use, the amount of funds, etc.

Do the investment managers sell some of the units held by the individual policyholders in those circumstances, or how is it managed and reported?

Certainly, given the normal lack of clear visibility of the AMC deductions on policy statements, I wonder how the policyholder can confirm they are only suffering the AMC agreed with the broker/investment manager, and not the more standard charge listed in boiler-plate marketing materials. Overall, I'm surprised with how this is so easily concealed by the investment managers/pension advisors.

 

[GSheehy]

because the AMC is a seemingly decent 0.32%

How is this invisible?

I then checked in with the penion investment manager as to how they deduct their AMC, and I was told that it is charged directly to the fund itself, so that's why my units don't change. Yet, this only makes sense to me if all unitholders are subject to the same % AMC.

If they're not taking the AMC by unit deduction then they're taking it via the unit price ie. the unit price is adjusted to reflect the charge. They're also taking the other ongoing fund costs and portfolio transaction costs via the latter method in your case, I'd say. Some companies even take part of the AMC via unit cancellation anf part via unit price adjustment.

Certainly, given the normal lack of clear visibility of the AMC deductions on policy statements, I wonder how the policyholder can confirm they are only suffering the AMC agreed with the broker/investment manager, and not the more standard charge listed in boiler-plate marketing materials.

AMCs are stated on the policy schedules/certificates. If they changed they'd have to notify you in advance. Any broker/product provider should be able to prove to you that the correct AMC is being deducted.

Simply claiming that something might be wrong, because it might be difficult to understand, doesn't mean that there's anything wrong. Folk just need someone to bring claritry to it for them..



Gerard

www.prsa.ie

 

[Villaines]

When I look at the "pension benefit statement" issued at the current employer, it is issued by Unio Invesco, there is a "statement of contributions". That has a line for "fees deducted", which is stated as Nil. Of course that's the contributions made, and there are no entry fees, so you could argue that that's not insincere, but it still says fees deducted Nil.

Then when it comes to the "retirement account" statement, it contains four lines:
1. opening balance
2. contributions invested
3. Investment Return and
4. Closing Balance

Clearly, any fees are being netted down within the "investment return" figure. They are not explicitly shown, so the pension account holder doesn't see what has been deducted in fees in euro.

There is also a breakdown which includes the closing unit price and the units held.

Amittedly, there is then an asset allocation table showing the primary asset classes of the 8 possible funds to be invested into. The last column in that table cites the investment manager fee % per annum, per fund.

But the exact draw on the pensioner's fund is not shown, because it's netted against the investment return.

In the old company DC pension fund, the pension statement is issued by Irish Life, similar format.

 

[GSheehy]

And when you asked Unio Invesco to prove to you that the correct AMC was being charged to your account, they said what?

If your issue is with the disclosure requirements on occupational pension schemes then that's the responsibility of the Pension Authority and you should take it up with them.

 

[Steven Barrett]

This got me wondering then about non-pension investment funds, PRSAs and ARFs where the individual might be able to negotiate a higher or lower AMC depending on the broker they use, the amount of funds, etc.

Do the investment managers sell some of the units held by the individual policyholders in those circumstances, or how is it managed and reported?

Your retained pension is in a group scheme. Unio are the administrators. They get the contributions each month and send the lump sum into the life company and they invest it as instructed. They do not know who owns what units. The life company deducts the cost for running the fund from within the fund when it is priced every day. The 0.32% is a historic cost as they don't know what this years cost will be until they tot it all up. Unio are paid by your employer.

If you set up a PRSA for example with a life company, the life company is the administrator of your PRSA. There is also an advisor. Both are to be paid and it will effect the amc on your plan. They are paid by selling parts of units each month to cover these costs. It is not efficient to get policyholders to sent them an annual cheque to cover fees. The cost is the annual management charge that was quoted to you when you took out the policy. There is no mystery to it. It is on your policy documents.

 

[Villaines]

nd when you asked Unio Invesco to prove to you that the correct AMC was being charged to your account, they said what?

If your issue is with the disclosure requirements on occupational pension schemes then that's the responsibility of the Pension Authority and you should take it up with them.

That's good advice, thanks