# Pension charges - What is a good deal



## NewEdition (29 May 2018)

I am looking at setting up a pension and have met a broker.
The charges are:

1% of value taken each year
3% of contribution taken at time of making the contribution 

Is this reasonable?

The broker is a friend of a friend and seems like a nice guy so am happy putting business his way, just want to be sure I am not getting ripped off


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## Protocol (29 May 2018)

No, this is yet another example of the massively excessive pension charges in Ireland.

It is possible to get:

1% AMC
0% ongoing contribution charges.


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## Protocol (29 May 2018)

AAM is full of discussions on pension fees, have a search around.


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## Gordon Gekko (29 May 2018)

It is the very antithesis of reasonable; it is scandalous.


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## Sunny (29 May 2018)

Is this a PRSA? Is the broker tied or is he independent? Is it an Irish Life product by any chance? Those charges are not low cost. There are cheaper and as mentioned above, you should be able to get 0% contribution charges.


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## NewEdition (29 May 2018)

Sunny said:


> Is this a PRSA? Is the broker tied or is he independent? Is it an Irish Life product by any chance? Those charges are not low cost. There are cheaper and as mentioned above, you should be able to get 0% contribution charges.


PRSA is 5% of contributions.
Tied broker I believe, he cannot reccomend other providers.. he was straight with me on that.
So give me a couple of example providers where it is 0%?
I imagine if I called them, I would be put in touch with a rep who would pester me constantly.. thats why I asked this guy.


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## Sunny (29 May 2018)

NewEdition said:


> PRSA is 5% of contributions.
> Tied broker I believe, he cannot reccomend other providers.. he was straight with me on that.
> So give me a couple of example providers where it is 0%?
> I imagine if I called them, I would be put in touch with a rep who would pester me constantly.. thats why I asked this guy.



You will need to shop around. I know you used to be able to access some Zurich and Irish Life PRSA's through Labrokers with 0% contribution charge. Not sure if that is still the case.


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## Protocol (29 May 2018)

www.labrokers.ie

Discount broker, no advice, execution only


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## Qwerty22 (30 May 2018)

From that labrokers link, it says they take 0.25% of the 1% AMC. 
So even if you know exactly what you want, the cheapest you can get still gives 0.25% of your pension fund forever to someone for simply passing on your application form and doing nothing else after that?


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## Steven Barrett (30 May 2018)

Qwerty22 said:


> From that labrokers link, it says they take 0.25% of the 1% AMC.
> So even if you know exactly what you want, the cheapest you can get still gives 0.25% of your pension fund forever to someone for simply passing on your application form and doing nothing else after that?



That is how they get paid. They get nothing upfront. If you pay €10,000 in the first year, they will get paid €25. It will take a number of years for them to make money on the policy. 



Steven
www.bluewaterfp.ie


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## Sunny (30 May 2018)

Qwerty22 said:


> From that labrokers link, it says they take 0.25% of the 1% AMC.
> So even if you know exactly what you want, the cheapest you can get still gives 0.25% of your pension fund forever to someone for simply passing on your application form and doing nothing else after that?



Yep. Welcome to the great pensions rip off. Not like Zurich will apply an AMC of 0.75 if you go directly to them either rather than having them pay a commission. Everyone wants a piece of the pie.


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## Steven Barrett (30 May 2018)

NewEdition said:


> I am looking at setting up a pension and have met a broker.
> The charges are:
> 
> 1% of value taken each year
> ...



How do you want to pay the advisor? If it's by way of commission, that is a reasonable rate as the maximum deduction of contributions is 5%. The 1% AMC is as laid out in legislation. There may be better options with a personal pension plan. 

If you would prefer to pay him by fee, you should have 100% of your money invested. He probably won't be able to charge you a fee if he's a tied agent though. 


Steven
www.bluewaterfp.ie


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## Sunny (30 May 2018)

SBarrett said:


> That is how they get paid. They get nothing upfront. If you pay €10,000 in the first year, they will get paid €25. It will take a number of years for them to make money on the policy.
> Steven
> www.bluewaterfp.ie



I am sure they probably do. Depending on the volume of the business, there are probably other rebates included. Not condemning them but if Zurich can afford to pay 0.25% of the AMC to LA Brokers then they should offer the AMC of 0.75% to direct customers. Otherwise what exactly is the direct customers 0.25% paying for apart from extra profit?


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## Steven Barrett (30 May 2018)

Sunny said:


> I am sure they probably do. Depending on the volume of the business, there are probably other rebates included. Not condemning them but if Zurich can afford to pay 0.25% of the AMC to LA Brokers then they should offer the AMC of 0.75% to direct customers. Otherwise what exactly is the direct customers 0.25% paying for apart from extra profit?



I use the 0.75% contract for my clients. 

But as has been discussed on other threads, insurance companies don't sell directly to the public, they use the broker market. Even if you walked in the door of a life office, you would talk to a tied agent of their direct sales team who get paid on what they sell. They won't offer the 0.75% contract as there's no commission payable under the structure. 


Steven 
www.bluewaterfp.ie


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## David Quinn (7 Jun 2018)

The lowest cost pension contracts on the market at the moment have a base management fee of 0.50%  (0.45 for Standard Life MyFolio Market and Aviva L&G). These have no deduction from your contribution (100% allocation) and pay no commission to the advisor. The Standard Life contract has early encashment penalties for the first 5 years (if you switch away).  As there is no commission you would have to pay an advisor to set up the contract for you, but this should not cost more than €700, which should then lead to a significant long term saving. Davy Select has a base management fee of 0.40%, but you then have to invest your funds. If you invest in direct equities there is no additional management fee, but if you invest in funds the additional fee will be between 0.06% and 1%+ depending on the fund chosen.


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## Sarenco (7 Jun 2018)

@David Quinn

I thought Davy charged a platform fee of 75bps for their execution-only PRSA - has this changed recently?

Also, when you say that Standard Life and Aviva have a "base management fee" of 50bps for specific products are you referring to their AMC or something else?  Are there any additional policy charges applicable to those products?

Many thanks in advance.


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## David Quinn (7 Jun 2018)

@Sarenco

The original poster didn't necessarily mention it had to be a PRSA so I'm using the Personal Pension pricing structures. The Davy Select PRSA has a 1% Annual Management Fee, with 0.50% going to the broker as 'commission / fees'. This 'commission' can always be offset against advisor fees or rebated depending on the deal struck, but good to know its there!!

The 0.50% base fee quoted for Standard Life for example have no other policy fees or charges. The underlying funds may have additional TER which is hard to quantify exactly within a pension contract as they are not required to disclose it. This would apply to any insured pension contract though. Their Vanguard offering will have a lower TER than most though.

Dave


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## Sarenco (7 Jun 2018)

Thanks Dave.

I would have thought that one of the advantages of the Davy PRSA is that it can be accessed without going through a broker/adviser (with all due respect to brokers/advisers).  Their charging structure is admirably transparent but I think it's still too expensive to be particularly attractive.

Friends First have a product with an AMC of 0.40%.  That carries a policy fee of €120pa but it seems like a reasonable deal for larger pension pots.


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## Qwerty22 (7 Jun 2018)

Do you have a link to that Friends First pension product with the AMC of 0.4% and the €120 application fee? (I can't see anything with charges like that mentioned on their site.)
Thanks.


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## Protocol (7 Jun 2018)

David Quinn said:


> The lowest cost pension contracts on the market at the moment have a base management fee of 0.50%  (0.45 for Standard Life MyFolio Market and Aviva L&G). These have no deduction from your contribution (100% allocation) and pay no commission to the advisor. The Standard Life contract has early encashment penalties for the first 5 years (if you switch away).  As there is no commission you would have to pay an advisor to set up the contract for you, but this should not cost more than €700, which should then lead to a significant long term saving. Davy Select has a base management fee of 0.40%, but you then have to invest your funds. If you invest in direct equities there is no additional management fee, but if you invest in funds the additional fee will be between 0.06% and 1%+ depending on the fund chosen.




What I see on the SL website is much higher AMC:

[broken link removed]

0.95% AMC on the MyFolio Market funds.


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## Qwerty22 (7 Jun 2018)

And if you look at the constituents of those MyFolio Market funds, they're nearly all Vanguard, which are ultra low cost!


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## David Quinn (7 Jun 2018)

The Friends First deal is a very good structure for larger accounts. The €120 annual policy fee (its not an application fee, and applies every year), takes the good out of the lower AMC until your account goes over €120,000 or so.

The 0.95% MyFolio Market quote on the Standard Life site is the full initial commission price. Standard Life don't like undercutting their commission based brokers!


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## David Quinn (12 Jun 2018)

Pricing across all the insurance providers, Conexim, Davy Select very similar now and falling all the time. I would recommend that anyone starting a pension now doesn't accept 5 years of early encashment penalties as I feel the market is going to get much more competitive. Fees will come down further so it will be worth having the flexibility to switch


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## Qwerty22 (13 Jun 2018)

So, imagine I have a cheap tracker ETF in mind, and a pot of €100k, what is the lowest cost pension I can get?

I have a SIPP from living the UK, and it has a fixed cost of ~£200/year, so on a £100K pot I'd only pay 0.2%, and with a low cost tracker (0.06%) a total annual charge of 0.26%. It looks like I'd struggle to even reduce it to 3 times that from an Irish pension.
(Also I didn't need to go through a broker to open the SIPP, I did it all online.)


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## David Quinn (13 Jun 2018)

It's an interesting question Qwerty! As an advisor myself, I haven't done much research into low cost pension contracts that retail investors could access directly themselves. 

Most SIPP and Small Self Administered Pension providers have a similar ongoing charging structure to your UK pension, with 0.25%+Vat Trustee and Admin fee, and then you could access Vanguard ETF's through a stockbroker for 0.06% as you mention. However, they all have a set up fee. There doesn't seem to be enough scale in the Irish market to attract the very low cost online providers. They are barely able to make money in the UK as it is.


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## macfran (18 Jun 2018)

Last year a relative of mine set up a pension policy with monthly payments of €700.
He has given me a copy of the " Allocation of Units" schedule, it states;

_The Initial Investment Percentage at the Policy Commencement date is 74% of the Relevant Contribution.
The Adjustment Date is 11 years from the Policy Commencement Date.

Based on the above am I correct in saying, from each monthly payment of €700 a deduction of €182 will be made for the first 11years?
Also there is AMC of 1%
_


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## Sarenco (18 Jun 2018)

Qwerty22 said:


> I have a SIPP from living the UK, and it has a fixed cost of ~£200/year, so on a £100K pot I'd only pay 0.2%, and with a low cost tracker (0.06%) a total annual charge of 0.26%. It looks like I'd struggle to even reduce it to 3 times that from an Irish pension.
> (Also I didn't need to go through a broker to open the SIPP, I did it all online.)


I'm afraid we can only dream of having that type of fee arrangement available to us here.


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## LDFerguson (18 Jun 2018)

macfran said:


> Last year a relative of mine set up a pension policy with monthly payments of €700.
> He has given me a copy of the " Allocation of Units" schedule, it states;
> 
> _The Initial Investment Percentage at the Policy Commencement date is 74% of the Relevant Contribution.
> The Adjustment Date is 11 years from the Policy Commencement Date._




I'd have to see the definition of the "Adjustment Date" as that's not an industry-standard term.  But it certainly looks like that whopping great deduction will be made for a certain period of time.


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## Gordon Gekko (18 Jun 2018)

That is highway robbery that Dick Turpin would be proud of.

No wonder the industry has such a bad name and people are so cynical about pensions.


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## Steven Barrett (20 Jun 2018)

macfran said:


> Last year a relative of mine set up a pension policy with monthly payments of €700.
> He has given me a copy of the " Allocation of Units" schedule, it states;
> 
> _The Initial Investment Percentage at the Policy Commencement date is 74% of the Relevant Contribution.
> ...



Is that in Ireland? I am not aware of any contract in the market that would deduct 26% of contributions for 11 years. I'm not even sure if there's any contracts out there that will pay deduct more than 25% of the first years premium. 


Steven
www.bluewaterfp.ie


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## LDFerguson (20 Jun 2018)

SBarrett said:


> Is that in Ireland? I am not aware of any contract in the market that would deduct 26% of contributions for 11 years. I'm not even sure if there's any contracts out there that will pay deduct more than 25% of the first years premium.
> 
> 
> Steven
> www.bluewaterfp.ie



My guess is that the "Adjustment Date" refers to something else - not the 74% allocation.  I'd assume / hope that the 74% allocation rate only exists for a year at most and then is higher.  But it's still a horrible contract in that future increases to the contribution above €700 per month will probably attract the same 26% charge for a period and so on.


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## macfran (21 Jun 2018)

The policy is with New Ireland.


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## Qwerty22 (21 Jun 2018)

The same New Ireland as was fined €650K in 2016 for providing inadequate information to its customers?
How do they have customers in this day and age with prices and practices like that?
(Just realised they are owned by Bank Of Ireland.)


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## Protocol (21 Jun 2018)

Macfran,

this look like an old policy, with initial units, and other units.

_*I can't believe it, but it seems they charge 26% of all premiums for the first 11 years?*_

It couldn't be that bad, could it?


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## macfran (21 Jun 2018)

Protocol*,*
The policy commencement date was December 2016.
Yes, 26% charges for the first 11 years and 24.75% for the next 11 years, plus 1% AMC.

*Incredible charges !!*


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## Steven Barrett (21 Jun 2018)

Did they go directly to New Ireland and get someone from the direct sales team for that contract? Because I have 5 charging structures available to me from New Ireland for regular premium pensions and none of them go as high as that. The maximum initial commission option under these options is 25%. 

Insurance companies make a number of different charging structures available. It is then for the advisor/ tied agent to decide which one their want to use to suit their business model. There are still a lot of advisors who charge the absolute maximum commission payable in all circumstances. This appears to be the case. The client should have been aware of these charges in advance of signing the contract...but then, when charging such big amounts, these types of advisors tend to bury the fees or not disclose them at all, in breach of their Central Bank obligations. 


Steven
www.bluewaterfp.ie


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## LDFerguson (21 Jun 2018)

I could be wrong, but, looking at post #32 above, I think that the 74% allocation only applies to an initial period, possibly a year and then the first year of any increase in contribution over the original €700.  Otherwise the Renewal Allocation Percentage applies, i.e. 98%.  As I've said before I'd need to see the full policy document and in particular the definitions of a few of the terms used like Adjustment Date.  

So it might not be quite as bad as 26% of all premiums for 11 years.  

That said, even if my optimistic interpretation is correct, it's still a VERY expensive charging structure.  What I also abhor is the fact that the charges are written in such a way that it's virtually impossible for a lay-person to understand them.  Initial Investment Percentage.  Regular Investment Percentage.  Renewal Investment Percentage.  Adjustment Date.  All unneccessary jargon and gobbledygook that exists solely to make it hard for a punter to understand what s/he's paying.  And that drives me mad, because it's what gives the Irish pensions industry a bad name.  The tax relief available on pensions is very attractive and I genuinely believe that anyone paying higher-rate tax should be contributing to a pension.  But I can completely understand why so many people are mistrustful of pensions, pension companies and brokers when they come across this sort of crap.  I'm nearly 30 years in the life & pensions industry and I'd have to see more of the documentation before I could say what this punter is actually being charged.


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## Protocol (21 Jun 2018)

I agree with LDFerguson x1000, very good post.

These opaque charging structures are not helping the industry in the long-run.


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## Protocol (21 Jun 2018)

Macfran,

I advise your relative to find how if there are any costs to cancel this policy.

Then switch to a low-cost PRSA with some of the pensions advisors that post here, or with LA Brokers.


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## Qwerty22 (21 Jun 2018)

There should be a legal requirement for all pensions (or financial products in general) to have a little fact box displayed prominently on all literature or websites relating to the product. 
(A bit like the nutritional value things on ready-meals where they show fat, salt, protein, etc.)
It should have: initial charge, AMC, amount going to broker, set up fee, cancellation fee. 
And don't allow any other charges that don't fit into the standard categories.
Also, have them colour coded too, just like a big red box for saturated fat on a chicken & bacon sandwich - any charge over 1% should be in red too as it's bad for your financial health!


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## Steven Barrett (22 Jun 2018)

Qwerty22 said:


> There should be a legal requirement for all pensions (or financial products in general) to have a little fact box displayed prominently on all literature or websites relating to the product.
> (A bit like the nutritional value things on ready-meals where they show fat, salt, protein, etc.)
> It should have: initial charge, AMC, amount going to broker, set up fee, cancellation fee.
> And don't allow any other charges that don't fit into the standard categories.
> Also, have them colour coded too, just like a big red box for saturated fat on a chicken & bacon sandwich - any charge over 1% should be in red too as it's bad for your financial health!



I agree 100%. MiFID II regulations make companies display charges as both a percentage and as a monetary amount. But insurance companies aren't regulated under MiFID II so it doesn't apply to them. 

The Central Bank has insisted on the mountain of paperwork and format of documents that have to be given to consumers so they have all the relevant information. It is an information overload and has made it easier for salesmen to bury their fees in all the paperwork. 

On my Reasons Why statement, I have adopted the MiFID II disclosure of fees in both % and €. Just about where you sign your name, there is a box with the following charges based on your initial investment amount:

Allocation Rate
AMC
OCF (where available)
Policy Fee
Early Exit Penalties 
Bluewater's set-up and ongoing fee

I concluded a long time ago that the most likely cause of a falling out with a client is over fees so I have always been 100% up front about them. And if someone doesn't want to pay for my advice, it probably wouldn't work out between us anyway. 


Steven
www.bluewaterfp.ie


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## Nova1919 (26 Jun 2018)

Hi guys, there is a link on the pensionsauthority website which allows you to download an excel file that will give you all the fees for PRSAs in Ireland.

(I would post the link but I'm blocked from doing so)


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## KCRMoney (18 Jul 2018)

Don't go near Irish life MAPS. Their fees are exorbitant. In the process of switching from them due to the fees charged


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## amadan1000 (26 Aug 2018)

KCRMoney said:


> Don't go near Irish life MAPS. Their fees are exorbitant. In the process of switching from them due to the fees charged


I have my directors pension with Irish life and 50 per cent of it is in Maps.I was under the impression that the fees were in line with their competitors.What are the fees with your new provider in comparison to maps?


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