What about the costs/ 0.5% cap?

[Duke of Marmalade]

I think I spot another nuanced change from Strawman. The 0.5% overall charge has been retained but the guarantor of last resort of this cap is the CPA. Submissions from providers all said they couldn’t operate at the 0.5% cap. But they are now only required to provide investment services. 0.5% is a hefty amount for investment services.
It is stated that the CPA might outsource admin services but state categorically that is they, the CPA, who are the ultimate deliverer within the 0.5% cap. What I envisage happening is that they get takers for investment management at say 0.25% and takers at 0.5% for fund admin and the CPA/taxpayer subsidise the fund, at least initially, to get within the cap.
That is fair enough, in the jargon a progressive fiscal stance for the reality is that low income contributors are not as commercially viable as high income contributors.

 

[Sarenco]

I actually think an "all in" capped fee of 0.5%pa, with no front-end contribution charges, is fairly reasonable.

There will obviously be very significant up-front costs to establish an appropriate infrastructure for the scheme. I would imagine that these costs will be met by the State in the first instance and will then be recouped from members over an extended period of time (perhaps over 20 years or so).

As Duke suggests, the OCF of the underlying funds are unlikely to be more than 0.25%pa but there will be significant ongoing costs in terms of administering the scheme. So, an "all in" cost to members of no more than 0.5%pa seems fair enough to me.

 

[GSheehy]

The Design Principles for AE states :


In addition, given that the scale of the funds under management (excluding investment returns) is estimated to reach just under €21bn by the end of 10 years, a cap of no more than 0.5% would still deliver a strong revenue line to RPs.


But, there's just €9.5bn (AUM) in PRSAs in circa 19 years.

Is the €21bn realistic?

Do we know if the cap of 0.5% includes Other Ongoing Costs?

It's noted that the Pensions Authority will be the Regulator of the AE products. Do we know if they will take 0.05% of the 0.5% like they do for PRSAs and will there be an initial fee of €20,000 and annual product approval fee of €2,000 for providers?

On some funds, certain TP/Other Ongoing costs on PRSAs (only) can't be passed on to clients. Will the same apply to Pension Authority Regulated AE products?


Gerard

www.prsa.ie