Best self directed pension

Discussion in 'Pensions' started by Connard, Mar 9, 2017.

  1. Connard

    Connard Frequent Poster

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    I'm a PAYE employee and I already have a pension set up with my employer. I'm not mad about it as the charges are quite high but my employer contributes to it as well so it's basically free money so I'll keep contributing to it. I'm looking to use the rest of my tax relief contribution limit to contribute to a self directed pension. I'm looking for one with low fees and that allows me to invest in ETFs. Basically, a pension version of Degiro. I've done a bit of googling but it's hard to get information on the fees.

    Irish Life charge €30 a trade which seems quite high. Absolutely no mention on their website, that I can see, of their allocation percentage or AMC.

    Zurich offer one as well but I can't find any details of their fees on their website.

    It's a complete pain in the ass.
     
  2. Merowig

    Merowig Frequent Poster

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    Davy
     
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  3. Sarenco

    Sarenco Frequent Poster

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  4. Merowig

    Merowig Frequent Poster

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    What charges are there with your employer's scheme that makes it expensive? Contribution charges?
     
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  5. Gordon Gekko

    Gordon Gekko Frequent Poster

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    Hi Sarenco,

    Is that not a function of the cost of running such structures?

    I would have thought that 1% per annum (no VAT) plus nil comm (which is available from quite a few providers) is decent enough.

    Easy to say when I'm paying 0.5% though I guess.

    Regards,

    Gordon
     
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  6. Connard

    Connard Frequent Poster

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    It's just a standard PRSA that's offered through our company so a 5% contribution fee and a 1% management fee. Even if it wasn't much cheaper to set up my own separate one, I'd still prefer it. I'd like to have one that I can put the rest of my contribution limit into and use it to invest in ETFs.

    Davy Select looks good. No contribution fee and a .75% management fee isn't bad. Obviously, I'd prefer better but if that's the best I can get then I'll go with it.
     
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  7. Sarenco

    Sarenco Frequent Poster

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    For Ireland, perhaps, but it's still pretty expensive by any other standard.

    The last time I checked, UK brokers were offering the equivalent product (SIPP) for around 25bps or a flat annual fee of around £100. The benefits of competition I suppose.

    Bear in mind that 75bps is just the cost of the pension wrapper. You still have to add the costs of acquiring the ETFs (bid/offer spreads, currency conversion costs (where relevant) and I see Davy charge additional commissions for ETFs that are not listed in Ireland or the UK) and the ongoing costs of the ETFs themselves (TER plus portfolio trading costs, less security lending income).

    Are you sure 0.5% is all you are paying?

    Bear in mind that the AMC does not equate to the fund's TER. The last time I looked into this I came to the conclusion that you can typically add 5-60% (depending on the asset class and whether or not its actively or externally manged) to a fund's AMC to bring it up to its TER.

    Also, the TER does not include the portfolio trading costs (brokerage, FX, stamp duty, etc.) of the fund. Needless to say, portfolio trading costs are considerably higher in actively managed funds.
     
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  8. Gordon Gekko

    Gordon Gekko Frequent Poster

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    Hi Sarenco,

    How does one go about finding out the TER of (say) an Irish Life or Zurich Life equity fund?

    And in any event surely things like FX etc are cheaper when done on a grand scale through a large fund rather than individually through a broker?

    Thanks.

    Gordon
     
  9. Sarenco

    Sarenco Frequent Poster

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    I'm afraid there is no reliable way of figuring out TERs for unit-linked funds. My estimates (and I would emphasise that they are just estimates) aren't based on publicly available data.

    As an aside, I think it's extraordinary that (a) our Central Bank allows this lack of transparency to continue; and (b) nobody seems to get upset about it.

    For sure - but there isn't much a fund manager can do about costs like stamp duty, etc.

    I don't want to give the impression that I think there a wholescale rip-off going on within the Irish retirement savings market - I'm simply trying to make the point that a fund's AMC does not represent anything like the full ongoing investment cost.

    While I think the Davy Select offering is pretty expensive (compared to similar offerings in the UK), it does, at least, have the merit of being relatively transparent.
     
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  10. Connard

    Connard Frequent Poster

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    How would this work for getting tax relief? As it's not going through my employer's payroll, I'll be paying into this account with my after tax income. Is it just a case of informing Revenue of the amount I paid into the second pension and then requesting a balancing statement? Can it be done through PAYE Anytime?
     
  11. Dan Murray

    Dan Murray Frequent Poster

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    The more I become aware of the Central Bank's actions and inactions, the more convinced I become of their ineptitude.
     
  12. martin

    martin New Member

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    After making a payment into your PRSA, you should receive a certificate from the pension provider which shows that you made that payment. At the beginning of the next year, collect those certificates and send them to revenue together with your P60 for the year and a note saying that you'd like your tax deductions. You can do that online using the "my inquiries" section.

    (I tried finding the official description of the above but couldn't; I trust that somebody will correct me if I got something wrong though)
     
  13. SBarrett

    SBarrett Frequent Poster

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    This is something that I bring up with life companies all the time and they have provided me with some data (I can't put it up on the web without their permission though). If they are to be believed, the additional charges are very low and the vast majority of the charges are reflected in the one that is declared.

    An big issue that insurance companies have is commission structures. A life company can have up to 6-7 different contract structures and each one has a bearing on the management fee. If there is no bonus allocation, there's a low AMC. A high allocation rate equals a high AMC. As life companies are reliant on the broker market they not going to disclose how much of the AMC is being used to pay broker fees. Conexim and Davy do not have this problem, there are no extra allocations (although Davy will pay an advisor 2% and recoup it over 36 months).

    The other issue is they do not want to disclose price sensitive information. When dealing with a large fund manager, a life company will strike a deal for funnelling hundreds of millions to a fund manager. They don't want this disclosed.


    But I agree that all cards should be on the table. It's not cheap to pay for all the components of managing money and financial advice. Hiding those charges from those who are paying it, isn't the way.

    Steven
    www.bluewaterfp.ie
     
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  14. Gordon Gekko

    Gordon Gekko Frequent Poster

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    Thanks Steven. I would have thought that the huge volumes traded by the life companies would give them enormous buying power. If there was more than 7 or 8 bps to be added, I'd be surprised.
     
  15. SBarrett

    SBarrett Frequent Poster

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    For the more expensive funds, the additional charge is reflected in the higher AMC. For example, Standard Life's GARS fund is 0.35% higher than their standard funds. This is the charge of the additional cost of running that fund. There's not loads of hidden charges in the background.

    But being opaque on charges, it only leads to speculation on what is being hidden...


    Steven
    www.bluewaterfp.ie
     
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  16. Sarenco

    Sarenco Frequent Poster

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    [Mods – Could this discussion on the transparency of pension charges be split off into a separate thread?]

    From the 2012 Department of Social Protection Report on Pension Charges:

    "The range of additional implicit costs identified [over and above the disclosed AMC] amount to reduction in yields of between 0.1% and 0.3% per annum, resulting in a further overall reduction in final pension fund value of 2% ‐ 4% for occupational pension schemes and individual pension arrangements. However, costs will depend on the underlying fund structure and can be significantly higher....

    The report concludes that the disclosure of information by providers is driven by existing regulation but is frequently presented in a format that does not impart upon the policy holder the level of insight or understanding intended by that regulation. Where there is no explicit requirement in regulation requiring the provision of particular information on charges, typically no information is provided to the policy holder. There is lack of a culture of clear and transparent provision of information to the consumer, which also impacts on competitiveness in the market.

    This report asks the question, are charges transparent? The conclusion is that there are deficiencies and inconsistencies in current practices regarding transparency and no culture of providing clear information in a simple manner was evident. A move towards greater clarity and transparency of pension charges is needed and would be of benefit to consumers. Any such initiatives must focus upon an increased consistency across all pension types relating to the provision and the real impact of pension charges as well as informing and educating consumers."

    So what's happened since 2012 to improve the situation?

    Nada.:mad:
     
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  17. SBarrett

    SBarrett Frequent Poster

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    Just another report on pensions that they spent hundreds of thousands on and have done nothing with.

    I always have a laugh when I read a government department giving out about pension charges. It is the government who introduced PRSA's to the market and put their charges in legislation. The 5% contribution charge and 1% AMC is a pretty expensive contract. Yet this is what the government thought was good value?!!

    Let the market decide. Charges on contracts are way lower than they used to be. The really old contracts has a 5% bid/offer spread and initial units with 5% AMC. All gone. The AMC on contracts are lower today than ever before, you can now have a 0.5% AMC. None of this is driven by the government, all by competition and by what the consumer wants.

    BTW, the Pensions Authority are looking to increase their power next year. On one hand, the give out about the high costs paid by policy holders but then they want to bring in layers of additional compliance and authority on their side. As the Pensions Authority is funded through policy holders, that means higher fees for pension funds.


    Steven
    www.bluewaterfp.ie
     
  18. caljaclew

    caljaclew New Member

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    I have looked at this a lot recently and ended up with a Self Directed fund with Friends First. They have platform with Cantor Fitzgerald which allow access to lots of ETFs. I pay 0.4% per annum to Friends First. Got 100% allocation and I'm currently in The Vanguard Total World ETF with a TER of 0.14%, FTSE 100 ETF with TER of 0.07% and Euro Corp Bond ETF with TER 0.20%.
     
  19. Gordon Gekko

    Gordon Gekko Frequent Poster

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    That's very good value to be fair. Is there commission on buys/sells?
     
  20. Connard

    Connard Frequent Poster

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    Are you sure about that? They have a PDF on their website with a list of charges for all their different accounts and the only self directed account I can see has an AMC of 0.75%.

    https://www.friendsfirst.ie/wp-content/uploads/Personal-Executive-Pension-Brochure_FriendsFirst.pdf

    It's on page 16.