# Are pension charges fair?



## ClubMan (2 Jul 2003)

Depends on what €190 is when expressed as a percentage of the overall current fund value. If the plan is new and was not "seeded" with a significant lump sum then this percentage would be very large. Annual management charges of c. 1% would normally be considered reasonable/competitive but they can go slightly lower and significantly higher. If €190 is a fixed charge (i.e. not indexed linked or subject to review or whatever) then the "annual management charge" as a percentage of fund value will presumably effectively reduce over time. Once the fund is worth €19000 plus the effective annual management charge would be c. 1% and presumably falling. Are you at liberty to divulge any more information about this plan - e.g. who sold it, who manages it etc.?


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## Contango10 (2 Jul 2003)

Clubman,

Hibernian Open Plan pension bought through Hibernian branch.  Started 2001.

No bid/offer fees, no monthly admin fee, no allocation rates.

The buyer didn't really realise that there was 8% commission on the policy.  They thought by going to branch it would be cheaper than broker.  As well as the 8% there was also an annual IR£150 "Plan Mgt charge".  No mention of this fee changing.

A year later they copped on to the commission and switched agency from branch to nil-commission broker.  So now just seems to be the annual 190 euro charge.

Contango10


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## Contango10 (2 Jul 2003)

A friend is paying about 130 a month into a private pension, nil commission basis.  No annual fund mgt charge, but there is an annual plan mgt charge of 190.

Is this good value????

Contango10


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## ClubMan (2 Jul 2003)

Hmmm... so let's assume that the fund has attracted 24 monthly payments of €130 to date (= €3120) and is worth roughly €4,000 today (which is probably very optimistic given the initial commission and recent market performance) which means that €190 is similar to a management charge of c. 4.75% for the current year. Given that it's possible to get pensions (e.g. PRSAs) with no charges other than an annual management charge of 1% this doesn't seem like a great deal and that annual charge represents a real drag on fund performance. Doesn't seem like a great deal to me unless I'm missing something obvious or otherwise here. Why did they choose Hib?


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## Contango10 (2 Jul 2003)

No, Clubman, you are not missing anything.  The scenario you outlined is correct.

Is it really possible to get PRSAs with JUST a 1% annual fund mgt charge, no other charges at all?

They choose Hib, as they were in the branch for a motor quote, and were asked "do you have a pension, etc.".  That's how they ended up with the policy.

C10


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## ClubMan (2 Jul 2003)

*Is it really possible to get PRSAs with JUST a 1% annual fund mgt charge, no other charges at all?*

Yes - _Michael Kiernan_ of www.myadviser.com mentions them  and I believe that _Liam D Ferguson_ of [broken link removed], and presumably (many?) others, offer similar deals.

*They choose Hib, as they were in the branch for a motor quote, and were asked "do you have a pension, etc.". That's how they ended up with the policy.*

Oh dear... :\


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