Master trust pensions

M

Marc

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So,I set aside a day to study the pricing of ONE of the new Master Trust pensions for company directors.

Some context. I’ve been working in financial services since 1992 and I’ve been a qualified financial adviser since 1994. I have a degree in economics and a rake of post graduate qualifications so this should be a walk in the park thought I.

Nope. After an entire day on a website and plugging various numbers into a spreadsheet I couldn’t accurately determine what it would cost ME to set up a one member executive pension for myself as a director of my own company.

We eventually found the information I needed on page 27 of the application form I would complete if I had already decided to proceed on the basis of not being able to establish what it was actually going to cost me.

Other than perhaps a mobile phone tariff I can’t think of any other consumer service which is so unnecessarily complicated when it comes to charges.

Having now cracked the code, as a business we are aiming to provide our clients with a pre-sale disclosure document which seeks to inform what the actual costs are in both percentage and Euro amounts and to illustrate the effect of those charges as a “reduction in yield figure”.

Surely that’s not too much to ask when buying something as significant as a pension is it?

Marc Westlake CFP®, TEP, EFP, APFS, QFA
 
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If employer contributions to PRSAs are to become unlimited in the New Year and PRSAs also don’t have the limits based on final salary that executive pensions suffer from, I wonder what the benefit of master trust pensions will be to company Directors?
 
Zenith63 said:
If employer contributions to PRSAs are to become unlimited in the New Year and PRSAs also don’t have the limits based on final salary that executive pensions suffer from, I wonder what the benefit of master trust pensions will be to company Directors?
Click to expand...

Typically PRSA annual charges are 1% and upwards, with a small few lower-charge versions for Vanguard funds from Standard Life. You'd probably get lower on a Master Trust, depending on commission.

For smaller funds (or larger salaries) it's possible to take up to 1.5 years' salary at retirement as a tax-free lump sum. So if your salary is €100,000 and your fund is €150,000 at retirement you could withdraw the full fund as a tax-free lump sum, subject to a couple of conditions. You can't do that with a PRSA where the lump sum is always capped at 25% of the fund.

But I do think that from 2023 onwards, any company director looking at setting up a pension plan will need to compare both PRSAs and Master Trust options for their particular circumstances and for those who are in the position that the company can afford to put in substantial contributions, the PRSA looks like the winner.

Regards,

Liam
www.FergA.com
 
Zenith63 said:
If employer contributions to PRSAs are to become unlimited in the New Year and PRSAs also don’t have the limits based on final salary that executive pensions suffer from, I wonder what the benefit of master trust pensions will be to company Directors?
Click to expand...
Employer limits are still very generous and in most cases it is not an issue on going over them. A lot of company director's pensions are underfunded anyway, with them going years of not making any contributions while they are establishing the business.

A very good use for the PRSA is the company director who has kept his salary low and has built up cash in the business.


Steven
www.bluewaterfp.ie
 
I've encountered the same challenge as Marc regarding the Master Trust pensions.
The management charges are not included on any material which I've been able to access and only seem to be included in the policy schedule I'd receive after deciding to proceed with an application.

@Marc - Are you sourcing the information on Master Trust pricing from materials only available to brokers? I'm interested to know how much the pricing has changed from the executive pensions that now need to be transferred to a master trust or PRSA

Is there no requirement in Ireland for providers to publish their charging structures on products like there is in the UK
 
I know in my specific case, I have two different pots in the same master trust, even then I cannot see exactly what is being charged (I had a good rummage around to see if there was anything clearly stated anywhere). The best that I could see was on the projection assumptions, they differ as to the effects of management charges, etc...

Pot A states: "The effect of charges on the projection is equivalent to a reduction in the investment return of 0.4% per annum. This figure fully reflects any policy fees, allocation charges and fund management fees which are calculated and deducted based on the offer price of the fund."

unfortunately Pot B states: "The effect of charges on the projection is equivalent to a reduction in the investment return of 0.7% per annum. This figure fully reflects any policy fees, allocation charges and fund management fees which are calculated and deducted based on the offer price of the fund."

However if I want a breakdown apparently the only way is to write and request them.

They weren't massively different but I did do a bit of ill-advised foostering about with which funds I was invested in, just in case it was an outcome of a difference there, but it didn't impact those figures given above.
 
@PensionPlans

Are you referring to the charges on a one person MT scheme?

@so-crates

I presume you're in a large scheme with a lot of members?

There is no disclosure requirement on Occupational Pension Schemes or Executive Pension Master Trust.


Gerard

www.prsa.ie
 
so-crates said:
I am yes, it was more because I noted the variability of the charge that it sparked my interest.
Click to expand...

Okay. So the 0.4% & 0.7% could be made up of any combination of AMC, Initial Charge, Policy Fee, Pensions Authority Fee, Other Ongoing (Fund) Costs or even Bid/Offer.

But, if @PensionPlans is looking at a one person scheme for themselves they haven't a hope of buying one with a RIY of 0.4% as there are clearly economies of scale involved to reduce the charges.

A RIY of 0.8% might be more realistic for on one person Master Trust scheme.

Gerard

www.prsa.ie
 
GSheehy said:
@PensionPlans

Are you referring to the charges on a one person MT scheme?

@so-crates

I presume you're in a large scheme with a lot of members?

There is no disclosure requirement on Occupational Pension Schemes or Executive Pension Master Trust.


Gerard

www.prsa.ie
Click to expand...
@GSheehy

I'm currently in a one person scheme but will have to move before the derogation from IORP II ends.

The master trust options I've seen will transfer all the single member schemes into their Master Trust pension scheme so will no longer be a one person scheme.

I haven't been able to find the AMC or dealing costs before any adviser charges or trail commission so very difficult to know how it will compare to my existing scheme.

I'm expecting some cost related to the trustee services to be added but none of the materials I've seen have any mention of fees and charges.
Has anyone who' has already moved to a master trust seen an increase in their charges.
 
From what I've seen to date, the pricing of the new is the same as the old and that the providers are absorbing the additional costs.

Nothing (bar early exit charges if you have them) to stop you moving it to a more competitive product if they dn't do like-for-like.


Gerard

www.prsa.ie
 
Hi Gerard,

It was suggested that they would do a like for like if I transferred and absorb the cost of using their master trust.
There are still surrender penalties on my policy but again the suggestion is that these would be waived if I'm transferring to the same providers master trust scheme.
I've not seen anything in writing and would really want to see the T&C's before making any decision.
It's a bit bizarre that the details only seem to exist in the policy schedule I'll receive during the transfer.
The PRSA option doesn't offer the same range of funds and no self directed options for direct equity investment.
I know Davy are restringing the investment options on their self directed exec pensions so that's another concern as I don't want to be limited to a restricted range of funds.

Are you seeing the pricing on some information only available to brokers/financial advisers?
 
PensionPlans said:
There are still surrender penalties on my policy but again the suggestion is that these would be waived if I'm transferring to the same providers master trust scheme.
Click to expand...

They're not going to be waived. They're going to transfer the penalties to the new contract until such time as they were due to run out on the old one.

If you know what you're currently paying then I'd say that's what you will have on the new contract after the move.

The pricing for all products, from all providers, is usually located in the broker only sections of the provider websites. Between regular and single contribution contracts (with varying terms) there could be circa 40 different pricing structures from each provider. Not too many intermedaries putting the pricing of products on their websites.

www.prsa.ie
 
Thanks Gerard,

A company I deal with moving their scheme to a master trust arrangement with the same provider and the management charges are increasing sightly.
I expected similar if I switched so would be very happy to stay on the existing terms.

The lack of charge information outside the broker section is very different to UK post RDR.

At a minimum the AMC and dealing charges should be publicly available for all products in my opinion.
 
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