# Downsides to PRSA with Standard Life



## PensionAdvic (7 Aug 2021)

Is there any downsides to moving a PRSA to Standard Life and using the Vanguard funds.

0.65% seems to be the best rate in the market?
Is there any extra costs?


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## Marc (7 Aug 2021)

The cheapest and undeniably the most transparent PRSA on the market is 0.50% wholesale for the pension wrapper and dealing and custody combined with access to a couple of thousand funds/ETFs


With the Standard Life contract, you’re not getting Vanguard funds you’re getting a Standard Life Mirror fund.

Significantly, You’re not getting anywhere near the full range of funds available and not being able to buy the Vanguard global smaller companies fund is enough of a reason to avoid this contract in my view









						When the Cheapest Option Isn't Always the Best - Everlake
					

We're advocates of low-cost investing. However, an obsession with the lowest cost option isn't always in investors' best interests.




					globalwealth.ie
				




And naturally you are not getting access to other funds (Blackrock, Dimensional, Pimco etc)

Objectively, all investors would be better served by a more transparent structure.

It is quite clear that allocation rates and early surrender penalties conceal the true cost of investing in Ireland to the detriment of Irish investors.

An alternative proposal is set out in detail here










						How Safe is My Pension? - Everlake
					

An 'unbundled' platform-based pension structure is our preference, due to the greater transparency and wider investment choices if offers.




					globalwealth.ie
				





“Ignorance more frequently begets confidence than does knowledge: it is those who know little, and not those who know much, who so positively assert that this or that problem will never be solved by science.” Charles Darwin

Marc Westlake
Chartered Certified and European Financial Planner
www.globalwealth.ie


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## Dave Vanian (8 Aug 2021)

Marc said:


> Best priced PRSA is 0.50% wholesale for the pension with access to a couple of thousand funds.
> You’re not getting Vanguard funds you’re getting a Standard Life Mirror fund.
> You’re not getting anywhere near the full range of funds or any other funds (Blackrock, Dimensional, Pimco etc)
> You’re not really paying 0.65% as there are other hidden costs
> ...



You're not comparing like with like.  On the product you're selling, the customer pays 0.5% for the PRSA *plus* the annual charge for the Vanguard fund *plus* the broker commission / fee which is a substantial charge that you seem to have forgotten to include.  If someone transfers a fund of €100,000 or more to the Standard Life product to get the terms you quote, the charges _*include*_ the broker commission.  The product you're selling is quite a good one, but for the purposes of fair comparison, the commission / seller fee shouldn't be hidden in examples like this.


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## SPC100 (8 Aug 2021)

Read this Post in thread 'Best value Self-Directed AVC PRSA for a 10-15K lump sum?' https://www.askaboutmoney.com/threa...rsa-for-a-10-15k-lump-sum.185475/post-1720058

It seems .65 with vanguard funds is only for a single large transfers. Afterwards it appears there are higher charges?


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## SPC100 (8 Aug 2021)

Elsewhere @Dave Vanian implied it can be had as cheap as .5% presumably with no advice.

Post in thread 'Total AMC 1% for PRSA' https://www.askaboutmoney.com/threads/total-amc-1-for-prsa.223990/post-1726952


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## SPC100 (8 Aug 2021)

Does the institutional vanguard fund have lower charges than the ETF folks can buy?

Or how would your graph look using a vanguard ETF that a consumer can buy in a prsa wrapper.


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## Marc (9 Aug 2021)

I think the confusion here is coming from the following.

The question on the thread is “downsides to standard life PRSA”

Fact. One of the most consistent themes I have campaigned for since publishing an article in the Irish Times in 2008 is more transparency and a ban on investment commissions in Ireland. Both objectively good for consumers and a challenge to the status quo.

Fact. Life company pensions are not subject to the same reporting obligations as, say, a UCITs fund.
To illustrate this point I simply compared a UCITs fund with the identical Standard life equivalent fund.

Fact.There is a difference in returns.
Can we explain exactly why there is a difference?


Well no, you see that’s the point about an opaque pricing structure. It’s not transparent. Ie people don’t know how much they are really paying and they don’t know what they are paying for. That’s my point. Just that.

Of course we know that distribution costs (commissions) are bundled into the overall charge but there are also other costs like trading frictions and taxes which investors incur but we have no way of knowing exactly what is what. We can’t therefore establish the true value.

That’s my point. Just that. Nothing else. A simple criticism of life company pricing and distribution model- since it’s clearly a downside.


Compared to what?


Well that’s a different question and that’s when the personal attacks always start.


You see there are those on here who I assume are either:


A)brokers who like the current murky pricing model as it suits them. For example, we know of one firm selling the pension I referenced with no commissions-essentially providing the pension for free, but then stuffing it full of toxic unregulated crap with ridiculously high commissions. Sadly, they don’t come in for vitriolic attacks on here.

B) DIY investors who are frankly pissed at me because I can obtain wholesale pricing that they clearly desire and it’s abundantly clear that their preferred reaction to this is to constantly and repeatedly seek to attack me and try to discredit me.

Both camps are,sadly, anonymous so we can’t ever check.

How convenient for them.

Of course we are able to leverage our ability to obtain better terms and we do this for the benefit of our clients. By way of example, the Vanguard institutional plus fund I referenced has a minimum investment of €100 million and an audited ongoing charges figure of 0.11%.

We don’t create a mirror fund Mark it up and charge a margin on that discount. Something we were explicitly told by a life company actuary is what is happening.

Investments are increasingly commoditised with little added value so investors shouldn’t be paying a premium simply to earn market returns.

Of course, our clients pay separately for trading, custody, and advice. But those are completely different services with different value to different people and so should be priced independently.
Here the flexibility to work in the clients best interest is really important.

All of our charges are clearly displayed and always have been - unlike our competitors. But the point about a professional fee agreed with the client is just that, it’s agreed with the client and not set by a life company and concealed by way of allocation rates and early surrender penalties. I do of course know that a PRSA can transfer to another provider without penalty, it’s a general point.

So anyone may judge for themselves the value of each service and, importantly, each separate service is completely interchangeable. If a client doesn’t want to pay our fees they are free to stop at any time without any penalties. How many life insurance contracts have no early surrender penalties at any time? How easy is it for a client to change the commission payment to a broker part way through a contract?

But we are not a discount broker engaged in a race to the bottom to facilitate a cheap contract with no advice. On another thread a poster was delighted to have negotiated a 0.15%pa ongoing advice charge for their pension.  On a typical Irish pension fund value that’s around €135pa. My car costs €750pa to service! Which is worth more?


What’s the plan when this financial adviser throws in the towel because they can’t meet their ongoing regulatory obligations on such derisory revenues? We certainly won’t be acquiring such a business and consolidation in the advice sector is certainly building pace.
At the extreme, some posters on here lead OPs towards an “execution only” service without advice.

Yet its patently obvious to me simply from the questions posted on here over the years that in reality MOST people actually need advice and don’t actually qualify for the regulatory definition of an execution only investor. They are being led in an unregulated forum to select a solution which maybe against their best interest and have no recourse for “bad advice” since of course they have received none.

As an aside, we actually went to the trouble of preparing a full wholesale service for genuine DIY pension investors in Ireland. A completely clean pension contract with access to thousands of funds with no commissions. It would have been substantially better value than anything else on the market and totally transparent.

However, we have permanently shelved the idea. The number of investors who genuinely qualify as professional investors capable of making their own investment decisions is minuscule.

By contrast, our clients are really nice people who really value what we do for them and we don’t want that to change.
I’ll finish with another fact on this particular theme.

Most of the pension money in Ireland is actually now invested in multi-asset funds. The main providers are Zürich, New Ireland, Irish Life etc.
Of these the vast majority of clients assets are held in risk profiles 2,3 and 4.
If these assets were simply held in the next risk profile up their expected returns on average would increase by around 2%pa.

That’s why MOST people need good advice.

The MOST important factor for MOST people is how soon they start saving (needs good advice) how much they save (needs good advice) and the net return they earn (needs good advice) not if they are paying 0.6%pa or 0.7%pa for their pension.

For MOST people thats why good advice is worth paying for AND clearly pays for itself.

For MOST people it isn’t about getting the cheapest product at all costs.
Some people might desire that, and they are of course, entitled to their own opinions.


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## SPC100 (9 Aug 2021)

Thanks.

I guess a better apple to apple comparison would be to show your institutional vanguard vs the vanguard ETF a customer could buy within Davy.


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## Marc (9 Aug 2021)

It’s impossible to debate serious issues on here


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## SPC100 (9 Aug 2021)

You compared vanguard global institutional fund to sl vanguard.

I suspect graph would look similar if you compared vanguard global consumer ETF to SL vanguard.

I am interested to see vanguard global institutional vs vanguard global consumer accessible ETF.

Op has at least three options for access to vanguard. SL vanguard, your offer with institutional vanguard, or buy vanguard consumer ETF.

I assume some of the gap in your graph is sl charge is being deducted from fund daily? I.e. it's close to what someone would see in their account. I assume .5 percent and other charges has to be removed from your clean graph?


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## Marc (9 Aug 2021)

it’s impossible to debate serious points on here


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## Sarenco (9 Aug 2021)

Marc said:


> example difference in performance between the "clean" Vanguard fund we use and the Standard Life version


The standard AMC applied by Standard Life to this fund (which I assume is being used in the comparison) is 0.90%, rather than the 0.65% AMC applicable to transfers in excess of €100k.

Throw in the fact that you have omitted the PRSA wrapper cost (0.50%), your own ongoing advisory fee (0.50%?) and investment management fee (0.55%?) and I'm struggling to see how your offering is cheaper than Standard Life's unit-linked fund.

Happy to be proved wrong.


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## SPC100 (9 Aug 2021)

Thanks for explaining your logic.



Marc said:


> Vanguard Emerging Markets Index fund 7.01%
> Vanguard Emerging Markets ETF 6.29%
> Difference 0.72%pa



Wow. How come such a big difference. Are they really tracking the same index?


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## Dave Vanian (9 Aug 2021)

SPC100 said:


> Elsewhere @Dave Vanian implied it can be had as cheap as .5% presumably with no advice.
> 
> Post in thread 'Total AMC 1% for PRSA' https://www.askaboutmoney.com/threads/total-amc-1-for-prsa.223990/post-1726952



In my earlier posts on that thread I was making the point that the OP might be better off going with a different type of pension product as PRSAs tend to have higher charges.  

_"Ask him if there are other pension products that would suit your needs better for a lower cost, e.g. Personal Pension or Executive Pension. PRSAs don't tend to be low cost."

"If you're happy to go with low-cost Vanguard index-tracking funds, ask him to set up a Standard Life plan for you with annual costs of less than 0.5% which includes both the cost of the vehicle and the annual cost of the Vanguard fund."

"The only additional cost is what you have to pay your broker and that's at their discretion."_


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## Marc (9 Aug 2021)

It’s impossible to debate serious points on here


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## Sarenco (9 Aug 2021)

Marc said:


> …how easy it is to trap the unwary…


Indeed.

But it’s a fairly scuzzy business model.


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## SPC100 (10 Aug 2021)

Hmm, can you post SL vanguard vs the actual vg ETF that tracks same index as the SL vanguard ideally vs the index also? Ideally for global where presumably most folks money is going.

That would show more directly how good or bad SL does vs a 'clean' more transparent version.

How are SL charges apllied here, are your SL graphs before the .65 / .9 wrapper?

Decades ago I looked at Quinn life regular contribution investment product over many years and they were impressively close to 1p.c. less than the fund/index they used, and try advertised 1p.c. amc i.e. appeared they were transparent.

Edit: I see there were some edits above. I might need to reread the thread!


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## Sarenco (10 Aug 2021)

Marc said:


> Objectively, the real cost to the investor is the difference between their return and the return of the index they are tracking. In this example the difference in annualised performance compared to the MSCI World Index of the Standard Life Vanguard fund over 3 years is 1.31%pa. So ignore the ex-ante contract fee disclosure and focus on the net ex-post return. That’s the real cost.


Not really.

The annualised *gross *total return of the MSCI World index for the three years to 31 July 2021 was 14.58%.  

The annualised *net* total return of the MSCI World index for the same three year period was 13.98%.  

As you know, gross return indexes reinvest as much as possible of underlying company dividends.  The reinvested amount is equal to the total dividend amount distributed to persons residing in the country of the dividend paying company.

On the other hand, the net total return of an index reflects the reinvestment of dividends *after* the deduction of withholding taxes, using a tax rate applicable to non-resident institutional investors who do not benefit from double tax treaties.

The convention is for index funds to track the net total return of an index.  In some respects, this is to the advantage of managers in the real world.   For example, tax treaties often reduce the DWT level assumed by the index provider and managers often engage in stock lending activities to reduce withholding taxes.

In any event, you can't simply compare the annualised performance of an index fund with the gross total return of an index and assume that the fund promoter is pocketing the balance.


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## SPC100 (10 Aug 2021)

@Sarenco I like your level of knowledge here.

I prefer you assume we don't know and you educate us!

I once did wonder about attempting to tune my choice of fund/ETF (for Davy prsa) based on the geo the funds were domiciled in and the geo most of the value of the fund was invested in. For funds that have larger dividend yields and are country specific I reckoned that could make a noteable difference to expected future return. But I soon gave up due to overwhelming complexity!


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## Dave Vanian (12 Aug 2021)

Marc said:


> It’s impossible to debate serious points on here



What a very odd reaction.  You posted several times with comparisons between the Standard Life Vanguard funds and the ITC PRSA investing in Vanguard that you sell, claiming that yours was better.  Your claims were challenged by me and others on several factual grounds including the fact that you didn't show the sales commission on your version, which would be a very relevant factor in any comparison, as it's a charge.  Rather than reply with further information, you deleted all your posts in this thread.  Seems a bit petulant to me, and not very helpful to anyone trying to educate themselves by reading this thread, which I thought is what Askaboutmoney is all about.


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## kinnjohn (12 Aug 2021)

to be fair Mark add to this site in getting posters to be more forthcoming when it comes to investing,


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## Dave Vanian (12 Aug 2021)

kinnjohn said:


> to be fair Mark add to this site in getting posters to be more forthcoming when it comes to investing,



I agree.  Some of his contributions to Askaboutmoney have been very helpful.  But refusing to answer questions on charges on his product and then deleting his posts isn't helpful to this particular thread.


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## kinnjohn (12 Aug 2021)

I agree but very few if any reveal all of their charges unless pushed into doing so,
I hope Marc keeps posting,


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## Sarenco (12 Aug 2021)

On reflection, maybe @Marc is right to compare the performance of an index fund with the gross (rather than the net) return of the index it is attempting to track, even if that is not the industry convention.  After all, withholding taxes reduce the return to investors.

So, the difference in annualised performance of the Vanguard Global Stock Index Fund Institutional Plus EUR Acc compared to the gross return of the MSCI World Index over the 3 years to 31 July 2021 was 0.61%.  That's 0.7% better than the 1.31% difference in annualised performance of the Standard Life Vanguard fund compared to the gross return of the MSCI World Index over the same period.

However, a difference of 0.7% is still nowhere near enough to make up for the cost of the PRSA wrapper plus advisory costs associated with Marc's unbundled offering.


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## Sarenco (12 Aug 2021)

kinnjohn said:


> I hope Marc keeps posting,


So do I - his posts are always thought-provoking.


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## kinnjohn (12 Aug 2021)

who got the other 0.6% ,


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## Sarenco (12 Aug 2021)

kinnjohn said:


> who got the other 0.6% ,


I'm not sure I understand the question.  Could you re-phrase?


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## SPC100 (12 Aug 2021)

Sarenco said:


> On reflection, maybe @Marc is right to compare the performance of an index fund with the gross (rather than the net) return of the index it is attempting to track, even if that is not the industry convention.  After all, withholding taxes reduce the return to investors.
> 
> So, the difference in annualised performance of the Vanguard Global Stock Index Fund Institutional Plus EUR Acc compared to the gross return of the MSCI World Index over the 3 years to 31 July 2021 was 0.61%.  That's 0.7% better than the 1.31% difference in annualised performance of the Standard Life Vanguard fund compared to the gross return of the MSCI World Index over the same period.
> 
> However, a difference of 0.7% is still nowhere near enough to make up for the cost of the PRSA wrapper plus advisory costs associated with Marc's unbundled offering.


I thought we already ascertained that they track two different indexes? So comparing them like this doesn't allow us to reason about performance difference from the two investment wrapper routes.

Imo, We need to compare SL to ideally a vg ETF that tracks the same index.


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## SPC100 (12 Aug 2021)

Marc said:


> It’s impossible to debate serious points on here



I also appreciate your posts Marc, but I don't think your habit of deleting / editing posts serves you or the community well.

I was following the thread and I didn't understand why you are finding it impossible to debate (or what).

My line of interest way about SL costs vs a low cost ETF which I think is an interesting and relevant topic to debate


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## Sarenco (12 Aug 2021)

SPC100 said:


> I thought we already ascertained that they track two different indexes? So comparing them like this doesn't allow us to reason about performance difference from the two investment wrapper routes.


No, both funds track the MSCI World Index.


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## nest egg (12 Aug 2021)

PensionAdvic said:


> Is there any downsides to moving a PRSA to Standard Life and using the Vanguard funds.
> 
> 0.65% seems to be the best rate in the market?
> Is there any extra costs?


To go bring this back to basics & clarify a few points:

Is this the [broken link removed] from Standard Life?
The total cost to the average punter is 1.31% for transfers over 100k, based on past performance?
The total cost is 1.56% (i.e. +0.25% + 1.31%) for anything under that?
Anyone can open a PRSA by contacting SL directly?


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## Sarenco (12 Aug 2021)

mojoask said:


> The total cost to the average punter is 1.31% for transfers over 100k, based on past performance?


No, 1.31% is the annualised difference in return of the SL/Vanguard fund (which I assume reflected their standard AMC of 0.90%), compared to the gross total return (concept explained in an earlier post) of the index (MSCI World) it purports to track for the three year period to 31 July 2021.

I appreciate this thread has become very difficult, probably impossible, to follow now that @Marc has deleted/edited his previous posts.

The bottom line is that the SL/Vanguard offering is probably as good as it gets for PRSA transfers over €100k.


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## kinnjohn (12 Aug 2021)

I don't blame Marc  some of the comments on this site were not so nice a few days ago,I hope he will be back posting again soon,


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## SPC100 (13 Aug 2021)

I agree. I feel their is a tendency for posters to be a bit too aggressive in general in replying to Marc. I think this mainly tends to happen on Mark's posts that are leaning towards marketing his products.


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## SPC100 (13 Aug 2021)

Sarenco said:


> The bottom line is that the SL/Vanguard offering is probably as good as it gets for PRSA transfers over €100k.


If you plan to add more thought aren't the charges higher?
What about Davy and buying a vanguard ETF direct?


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## Sarenco (13 Aug 2021)

Marc said:


> The cheapest and undeniably the most transparent PRSA on the market is 0.50% wholesale for the pension wrapper and dealing and custody combined with access to a couple of thousand funds/ETFs


If it was possible to access this unbundled product without incurring advisory and/or investment managements costs, then I would agree with yesterday's reformulation of your original response.

But that's obviously of academic interest to the OP.


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## Gordon Gekko (13 Aug 2021)

SPC100 said:


> I think this mainly tends to happen on Mark's posts that are leaning towards marketing his products.


Are there any other kind of posts?


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## kinnjohn (13 Aug 2021)

yes there are
Mark posts has opened up a lot of good discussions flushing out hidden charges others may not have revealed without Mark input,
Mark reveals enough to open up discussions rather than trying to close down discussions,


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## Dave Vanian (13 Aug 2021)

kinnjohn said:


> yes there are
> Mark posts has opened up a lot of good discussions flushing out hidden charges others may not have revealed without Mark input,
> Mark reveals enough to open up discussions rather than trying to close down discussions,



Yes - I'd welcome any posts that seek to inform readers here, by making information available freely.  Marc does that in other threads and I hope he continues doing that.  

In this particular thread, he posted a comparison between his own product and the Standard Life / Vanguard product claiming that his product was better.  But he showed the Standard Life charges including sales commission and left out the sales commission on his own product.  That makes the comparison invalid on the basis of charges.  This was challenged by me and others and instead of clarifying or correcting his posts, he simply deleted them and replaced them with rather sulky-looking comments about not being able to debate here, which effectively destroyed most of the entire thread by rendering it virtually impossible to read or follow.  I still think that this was a rather petulant and unhelpful thing to do.  That said, it's just one thread.  I repeat that I'd be happy to see more constructive and helpful contributions from Marc in the future, like the helpful and informative posts he has made before.


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