Pension charges - What is a good deal

Discussion in 'Pensions' started by NewEdition, 29 May 2018.

  1. Qwerty22

    Qwerty22 Registered User

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    And if you look at the constituents of those MyFolio Market funds, they're nearly all Vanguard, which are ultra low cost!
     
  2. David Quinn

    David Quinn Frequent Poster

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    The Friends First deal is a very good structure for larger accounts. The €120 annual policy fee (its not an application fee, and applies every year), takes the good out of the lower AMC until your account goes over €120,000 or so.

    The 0.95% MyFolio Market quote on the Standard Life site is the full initial commission price. Standard Life don't like undercutting their commission based brokers!
     
  3. David Quinn

    David Quinn Frequent Poster

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    Pricing across all the insurance providers, Conexim, Davy Select very similar now and falling all the time. I would recommend that anyone starting a pension now doesn't accept 5 years of early encashment penalties as I feel the market is going to get much more competitive. Fees will come down further so it will be worth having the flexibility to switch
     
  4. Qwerty22

    Qwerty22 Registered User

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    Last edited: 13 Jun 2018
    So, imagine I have a cheap tracker ETF in mind, and a pot of €100k, what is the lowest cost pension I can get?

    I have a SIPP from living the UK, and it has a fixed cost of ~£200/year, so on a £100K pot I'd only pay 0.2%, and with a low cost tracker (0.06%) a total annual charge of 0.26%. It looks like I'd struggle to even reduce it to 3 times that from an Irish pension.
    (Also I didn't need to go through a broker to open the SIPP, I did it all online.)
     
    Last edited: 13 Jun 2018
  5. David Quinn

    David Quinn Frequent Poster

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    It's an interesting question Qwerty! As an advisor myself, I haven't done much research into low cost pension contracts that retail investors could access directly themselves.

    Most SIPP and Small Self Administered Pension providers have a similar ongoing charging structure to your UK pension, with 0.25%+Vat Trustee and Admin fee, and then you could access Vanguard ETF's through a stockbroker for 0.06% as you mention. However, they all have a set up fee. There doesn't seem to be enough scale in the Irish market to attract the very low cost online providers. They are barely able to make money in the UK as it is.
     
  6. macfran

    macfran Registered User

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    Last year a relative of mine set up a pension policy with monthly payments of €700.
    He has given me a copy of the " Allocation of Units" schedule, it states;

    The Initial Investment Percentage at the Policy Commencement date is 74% of the Relevant Contribution.
    The Adjustment Date is 11 years from the Policy Commencement Date.

    Based on the above am I correct in saying, from each monthly payment of €700 a deduction of €182 will be made for the first 11years?
    Also there is AMC of 1%
     
  7. Sarenco

    Sarenco Frequent Poster

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    I'm afraid we can only dream of having that type of fee arrangement available to us here. :(
     
  8. LDFerguson

    LDFerguson Frequent Poster

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    I'd have to see the definition of the "Adjustment Date" as that's not an industry-standard term. But it certainly looks like that whopping great deduction will be made for a certain period of time.
     
  9. Gordon Gekko

    Gordon Gekko Frequent Poster

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    That is highway robbery that Dick Turpin would be proud of.

    No wonder the industry has such a bad name and people are so cynical about pensions.
     
  10. SBarrett

    SBarrett Frequent Poster

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    Is that in Ireland? I am not aware of any contract in the market that would deduct 26% of contributions for 11 years. I'm not even sure if there's any contracts out there that will pay deduct more than 25% of the first years premium.


    Steven
    www.bluewaterfp.ie
     
  11. LDFerguson

    LDFerguson Frequent Poster

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    My guess is that the "Adjustment Date" refers to something else - not the 74% allocation. I'd assume / hope that the 74% allocation rate only exists for a year at most and then is higher. But it's still a horrible contract in that future increases to the contribution above €700 per month will probably attract the same 26% charge for a period and so on.
     
  12. macfran

    macfran Registered User

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    The policy is with New Ireland.

    [​IMG]
     
  13. Qwerty22

    Qwerty22 Registered User

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    The same New Ireland as was fined €650K in 2016 for providing inadequate information to its customers?
    How do they have customers in this day and age with prices and practices like that?
    (Just realised they are owned by Bank Of Ireland.)
     
  14. Protocol

    Protocol Frequent Poster

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    Macfran,

    this look like an old policy, with initial units, and other units.

    I can't believe it, but it seems they charge 26% of all premiums for the first 11 years?

    It couldn't be that bad, could it?
     
  15. macfran

    macfran Registered User

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    Protocol,
    The policy commencement date was December 2016.
    Yes, 26% charges for the first 11 years and 24.75% for the next 11 years, plus 1% AMC.

    Incredible charges !!
     
  16. SBarrett

    SBarrett Frequent Poster

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    Did they go directly to New Ireland and get someone from the direct sales team for that contract? Because I have 5 charging structures available to me from New Ireland for regular premium pensions and none of them go as high as that. The maximum initial commission option under these options is 25%.

    Insurance companies make a number of different charging structures available. It is then for the advisor/ tied agent to decide which one their want to use to suit their business model. There are still a lot of advisors who charge the absolute maximum commission payable in all circumstances. This appears to be the case. The client should have been aware of these charges in advance of signing the contract...but then, when charging such big amounts, these types of advisors tend to bury the fees or not disclose them at all, in breach of their Central Bank obligations.


    Steven
    www.bluewaterfp.ie
     
  17. LDFerguson

    LDFerguson Frequent Poster

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    I could be wrong, but, looking at post #32 above, I think that the 74% allocation only applies to an initial period, possibly a year and then the first year of any increase in contribution over the original €700. Otherwise the Renewal Allocation Percentage applies, i.e. 98%. As I've said before I'd need to see the full policy document and in particular the definitions of a few of the terms used like Adjustment Date.

    So it might not be quite as bad as 26% of all premiums for 11 years.

    That said, even if my optimistic interpretation is correct, it's still a VERY expensive charging structure. What I also abhor is the fact that the charges are written in such a way that it's virtually impossible for a lay-person to understand them. Initial Investment Percentage. Regular Investment Percentage. Renewal Investment Percentage. Adjustment Date. All unneccessary jargon and gobbledygook that exists solely to make it hard for a punter to understand what s/he's paying. And that drives me mad, because it's what gives the Irish pensions industry a bad name. The tax relief available on pensions is very attractive and I genuinely believe that anyone paying higher-rate tax should be contributing to a pension. But I can completely understand why so many people are mistrustful of pensions, pension companies and brokers when they come across this sort of crap. I'm nearly 30 years in the life & pensions industry and I'd have to see more of the documentation before I could say what this punter is actually being charged. :mad:
     
  18. Protocol

    Protocol Frequent Poster

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    I agree with LDFerguson x1000, very good post.

    These opaque charging structures are not helping the industry in the long-run.
     
  19. Protocol

    Protocol Frequent Poster

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    Macfran,

    I advise your relative to find how if there are any costs to cancel this policy.

    Then switch to a low-cost PRSA with some of the pensions advisors that post here, or with LA Brokers.
     
  20. Qwerty22

    Qwerty22 Registered User

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    There should be a legal requirement for all pensions (or financial products in general) to have a little fact box displayed prominently on all literature or websites relating to the product.
    (A bit like the nutritional value things on ready-meals where they show fat, salt, protein, etc.)
    It should have: initial charge, AMC, amount going to broker, set up fee, cancellation fee.
    And don't allow any other charges that don't fit into the standard categories.
    Also, have them colour coded too, just like a big red box for saturated fat on a chicken & bacon sandwich - any charge over 1% should be in red too as it's bad for your financial health!