# Buiy out bond start-up fee



## Madra (3 Oct 2007)

I moved jobs a few years ago and left my old Employer Occupational pension in situ. I have since been informed that the pension is being closed down as the company has been taken over and I have been given a few options as to what I can do with my contributions over the years. I’m toying with the idea of a buy out bond but could move it to my current employer also. Having looked at the T&C of the bond which I can keep with the current pension provider I saw that there was a once off fee of 5% to move to a bond and small management fees (< .8%) thereafter. The once-off fee seems very high at 5%. Is this a normal percentage? Does anyone know of a lower buy-in rate for a bond with another institution? AFAIK there is no charge to move the pension to my current employer.


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## LDFerguson (3 Oct 2007)

Irish Life's Buy Out Bond product offers an entry charge of <1% with ongoing annual management charges of 0.65% for index-tracking funds or 0.75% for actively-managed ones.  

Liam D. Ferguson
www.ferga.com


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## Madra (4 Oct 2007)

That sounds reasonable but the booklet they sent to me stated 5% once off set-up or entry fee. I will try and contact them so.
Thanks


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## LDFerguson (4 Oct 2007)

I wonder is the 5% fee mentioned a bid/offer spread?  If so, it may be reduced to some degree by an enhanced allocation.  For example, if there's a 5% bid/offer spread but your allocation rate is 105.5% or higher, that's effectively no charge.  (105.5 - 5% = 100.225%).

All our Irish Life Buy Out Bonds have an allocation rate of 106% - sometimes higher for large amounts.


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## Madra (4 Oct 2007)

Thanks LD - You hit the nail right on the head. The allocation rate is between 105% and 106% so I think the fee I refer to is the spread or bid. So I guess its the old swings and roundabouts. Just as a matter of interest is there a reason for stating the figures in this way ? Why not just allocate 100% and say free set up charges ?


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## LDFerguson (4 Oct 2007)

> Just as a matter of interest is there a reason for stating the figures in this way ? Why not just allocate 100% and say free set up charges ?


 
I'm not sure there's an inarguable reason as some companies have dispensed with the concept of bid/offer spreads altogether and express the charges in the simpler way you suggest.

If I was being cynical, I'd say it was a throw-back to the days before commission disclosure when life & pension companies deliberately dreamed up of absurdly complex charging structures and jargon to make it difficult for consumers to understand what the charges really were.


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