# Best self directed pension



## Connard (9 Mar 2017)

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.


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## Merowig (9 Mar 2017)

Davy


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## Sarenco (9 Mar 2017)

The Davy Select offering is certainly worth considering but it's not particularly cheap -
http://www.davyselect.ie/binaries/c...t/pdfs/execution-only-fees-charges.pdf#page=5

You might find that it would actually be more cost effective to make AVCs to your employer's scheme.

I'm afraid the idea of a cheap, entirely transparent pension wrapper is something of a holy grail in our retirement savings market.


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## Merowig (9 Mar 2017)

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


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## Gordon Gekko (9 Mar 2017)

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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## Connard (9 Mar 2017)

Merowig said:


> What charges are there with your employer's scheme that makes it expensive? Contribution charges?



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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## Sarenco (9 Mar 2017)

Gordon Gekko said:


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



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).



Gordon Gekko said:


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



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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## Gordon Gekko (9 Mar 2017)

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


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## Sarenco (10 Mar 2017)

Gordon Gekko said:


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



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. 



Gordon Gekko said:


> 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?



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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## Connard (10 Mar 2017)

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?


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## Dan Murray (10 Mar 2017)

Sarenco said:


> 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.



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


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## martin (11 Mar 2017)

Connard said:


> 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?



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)


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## Steven Barrett (13 Mar 2017)

Sarenco said:


> 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.
> 
> ...



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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## Gordon Gekko (13 Mar 2017)

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.


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## Steven Barrett (13 Mar 2017)

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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## Sarenco (13 Mar 2017)

[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.


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## Steven Barrett (13 Mar 2017)

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


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## caljaclew (13 Mar 2017)

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%.


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## Gordon Gekko (13 Mar 2017)

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


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## Connard (13 Mar 2017)

caljaclew said:


> 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%.


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%.



It's on page 16.


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## Steven Barrett (14 Mar 2017)

Friends First do have a contact with an AMC of 0.4% if you use ETFs/ Indexed funds. That contract has a whopping big policy fee of €120 a year. 

Steven
www.bluewaterfp.ie


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## Gordon Gekko (14 Mar 2017)

Steven,

That's good to know; not whopping in the context of a meaningful sized fund.

Gordon


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## Steven Barrett (15 Mar 2017)

Whopping in comparison to what else is charged. The highest policy fee I've seen before that is €5 a month. 

But agree, if you have a decent size fund, a monetary fee has a smaller effect than a percentage based fee. 


Steven
www.bluewaterfp.ie


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## Sarenco (15 Mar 2017)

The policy fee adds 0.012% to the AMC on a €1m portfolio. That's fairly trivial in the grand scheme of things.


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## Connard (15 Mar 2017)

Sarenco said:


> The policy fee adds 0.012% to the AMC on a €1m portfolio. That's fairly trivial in the grand scheme of things.


True but when you're building that fund from nothing up to €1m then it is expensive. If you could start off somewhere cheaper and transfer into that friends first account when you have a decent sized portfolio then that would be ideal.


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## Sarenco (15 Mar 2017)

Connard said:


> If you could start off somewhere cheaper and transfer into that friends first account when you have a decent sized portfolio then that would be ideal.



Absolutely - assuming you can get a 100% allocation.

On that basis, by my calculations, the Friends First offering starts to look cheaper than the Davy offering once the portfolio reaches around €25k.


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## mtk (15 Mar 2017)

SBarrett said:


> Friends First do have a contact with an AMC of 0.4% if you use ETFs/ Indexed funds. That contract has a whopping big policy fee of €120 a year.



nice to know


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## Connard (15 Mar 2017)

Sarenco said:


> Absolutely - assuming you can get a 100% allocation.
> 
> On that basis, by my calculations, the Friends First offering starts to look cheaper than the Davy offering once the portfolio reaches around €25k.



My calculations give a figure of €34,286. Davy is at .75% AMC whereas FF is a .4% AMC and €120. So, 120 has to be less than .35% of the fund value. 342.86 * .35 = 120.01.

So below €34,286 Davy is cheaper, over that FF is cheaper.


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## Sarenco (15 Mar 2017)

Connard said:


> My calculations give a figure of €34,286. Davy is at .75% AMC whereas FF is a .4% AMC and €120. So, 120 has to be less than .35% of the fund value. 342.86 * .35 = 120.01.



I think you need to add the weighted average TER of the underlying ETFs/funds to Davy's 0.75% wrapper cost - I assumed 0.15%.


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## Connard (15 Mar 2017)

Sarenco said:


> I think you need to add the weighted average TER of the underlying ETFs/funds to Davy's 0.75% wrapper cost - I assumed 0.15%.



Surely there is a cost for ETFs and funds with FF as well. If you get the same ETF through Davy and FF then wouldn't the cost be the same?


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## Sarenco (15 Mar 2017)

Connard said:


> Surely there is a cost for ETFs and funds with FF as well. If you get the same ETF through Davy and FF then wouldn't the cost be the same?



As I understand it (and perhaps Steven might be good enough to correct if I'm wrong), Friends First offer a self-directed investment option (through Cantor FitzGerald) for 75bps (or 50bps plus a policy fee of €120).  So you would have to add the cost of the underlying ETFs to get to the total cost of that option.

Separately, Friends First offer a range of State Street index funds for 65bps (or 40bps plus a policy fee of €120) but there is no additional charge to access these funds.


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## Steven Barrett (15 Mar 2017)

I can't find anything on Friends First's broker site about the charging structures of their self directed options with Cantor. I see on the Cantor site, they also use Zurich as a wrapper. 

On the Zurich site, the AMC is 1% for the self directed option. 

I use Conexim for self directed pensions. They have teamed up with ITC to provide their wrapper. The base charge for a PRSA is 0.5%. A SSAS is 0.4%.


Steven 
www.bluewaterfp.ie


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## letitroll (16 Mar 2017)

Gordon Gekko said:


> Steven,
> 
> That's good to know; not whopping in the context of a meaningful sized fund.
> 
> Gordon



Anyone have link for Friends First 0.4% / 120e product? Cant seem to see it online, do you need a broker to access or can you ring them directly?


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## Mez! (14 Dec 2017)

letitroll said:


> Anyone have link for Friends First 0.4% / 120e product? Cant seem to see it online, do you need a broker to access or can you ring them directly?



Sorry to dig up this thread again, but does anyone know how to access this product?


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## Sarenco (14 Dec 2017)

Mez! said:


> Sorry to dig up this thread again, but does anyone know how to access this product?


You could try ringing them but I'm pretty sure you would have to go through a broker.


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## LDFerguson (14 Dec 2017)

Sarenco said:


> You could try ringing them but I'm pretty sure you would have to go through a broker.



I think you're right.  My understanding is that if you ring Friends First directly, they will refer you to a broker.


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## Steven Barrett (15 Dec 2017)

Sarenco said:


> You could try ringing them but I'm pretty sure you would have to go through a broker.



...or what usually happens is that you get the direct sales team, people who live off commissions and selling...



Steven
www.bluewaterfp.ie


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## letitroll (19 Dec 2017)

SBarrett said:


> ...or what usually happens is that you get the direct sales team, people who live off commissions and selling...
> 
> 
> 
> ...



Steven - are these self-directed options available as self-directed PRSA AVC’s?  Or is the AVC piece a problem in the self directed space?

I’m specifically interested in a self-directed PRSA AVC which allows investing in specific company shares. If available what provider has the best options for this for a fund of c.50k & growing


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