Management fees

BlueSpud

Frequent Poster
Messages
873
I have a private pension for years and have been charged about 1.5% on this, and it is still only worth what I paid into it, so I have fed the beast for years and inflation is killing my pension.

Seperatly, I have about 200k to invest and have been recomended a particular firm, and I dont want to make the same mistake again. I have more control over my investment. This firm charge 1.25% management fees. I am happy to pay a fee when I get value for money. Is it possible to negotiate fees, i.e. get a reduced fee if the performance is negative, or below inflation, and I would be more than willing to pay a higher fee on success. Is this a thing for this level of investment? Just trying to get a flavour of what is out there before I sign up.
 

Jimmy Dee

Frequent Poster
Messages
51
hi
another pension story, I am sorry to hear that you have poured money into one and its not moved despite one of the best stock market runs in history. Strange. It ain't inflation that's killing your returns, its the costs as you rightly point out first, I am also guessing that the annual 1.5% charge isn't the only cost. (1.25% to me is also too high with the other layers of costs). The only other cause could be a poor choice of underlying funds including funnies such as PE gone wrong. I have no suggestion as there are no real alternatives under your own control in Ireland that give you the advantage of tax shelter and employer contributions other than a pension with these punitive fees. Alternatively you can invest directly in the market with normal platform costs and the horrendous Irish tax rates.
J
 

Zebedee

Frequent Poster
Messages
75
As a matter of interest, what have you been investing in (eg equities bonds etc)? Equity and property funds have been producing strong returns over the last 10 years and inflation has been virtually zero.

In relation to your question it is difficult to negotiate on your own (unless you have a huge fund) but brokers will be aware of (and have access to) deals in the market. They can also advise on what investments are appropriate given your circumstances. (I’m not a broker).

The charges that are disclosed typically do not include charges for custodians, transaction costs etc. So you could be paying charges in excess of those quoted. The biggest difference between quoted and actual costs I have seen are for property funds.

I would avoid success/performance fees. They are usually high (eg 20pc of growth) and bring their own problems (eg if the fund has fallen considerably and there is little chance of the manager getting their performance fee, they tend to lose interest and let the funds drift).
 

Jimmy Dee

Frequent Poster
Messages
51
Hi,
just one thing I would add, perhaps the only way to get "comfortable" with paying very large Irish style fees is first to do what Zebedee suggested and check what you can get in regards to fee reductions for larger amounts. Then you could work out the advantage of holding a pension (lowest fees you can get and standard simple fund allocation to fixed income and equities) over investing yourself in the market via comparable ETFs or IT's. Take a 20 year period or whatever suits you best in the longer run and work out the tax advantage and the employer contribution advantage that you gain versus the 41% tax and the lower say 0.2% fee + dealing costs, spread drag. And then publish the results here. Maybe some kind person here might point out that someone has already done that, I didn't check? Remembering the 25% tax free lump sum and the other thresholds etc.
J
 
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