# Discount/execution-only pension options



## Sarenco (21 Aug 2019)

Zenith63 said:


> I’ve removed the winky face as that came across far more conspiratorial than intended . However the perception was that the pension provider might be annoyed that the existence of this ‘direct’ model was being advertised.


You might as well go the full hog and tell us who the insurer is.

100% allocation, 0.75% AMC and zero policy fees - right?


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## Zenith63 (21 Aug 2019)

Sarenco said:


> You might as well go the full hog and tell us who the insurer is.
> 
> 100% allocation, 0.75% AMC and zero policy fees - right?


Yes and the provider was Zurich.  Rang the number on their site, spoke to a very helpful chap on the phone who answered lots of my questions, met him at the Zurich offices in Blackrock to sign the paperwork, money was flowing into the plan within a couple of weeks, now have a nice dashboard where I can login and see premiums paid and the performance of the various funds I chose.

Just want to say again though that I had a strong idea of what I wanted, but I can very much see the value of proper advice when it comes to pensions.  The concern I had as I met some brokers and researched this was the trivialising of the trailing fees that brokers earn and how quiet some of the cheaper options are kept.  And here if I ran a business in this area I'd so the same thing, but there are certain areas where consumers need extra protections and pensions is one of them imho.

Edit: Apologies there is a €3.50 policy fee per month.  But over the lifetime of a 30-40 year pension that is peanuts, if you can get your AMC down by even 0.01% (so 0.75% to 0.74%) you are saving money by paying that €3.50 every month on a €1m pension pot.


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## gnf_ireland (21 Aug 2019)

Sarenco said:


> 100% allocation, 0.75% AMC and zero policy fees - right?



Is this considered a great deal on pensions contributions ? Its one of those things which is very hard to compare without knowing what others are on. Are there other conditions applied to the policy - for example exit penalties for leaving within the first 5 years etc, or restrictions on the available fund choices (I know Zurich has access to funds which have a premium applied to them). 
I assume this was for regular pension contributions and did it have a minimum contribution amount?

Can I ask if it also included a transfer of an existing pension into the policy, as its likely that may influence considerations as well?

I am just (selfishly) trying to assess the deal I got off them 3 years ago in terms of competitiveness


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## Sarenco (21 Aug 2019)

gnf_ireland said:


> Is this considered a great deal on pensions contributions ?


Well, it wasn't my title - I've suggested a change to the Mods.

But I did ask the Mods to split this out into a separate thread because I think it's worth highlighting.

A PRSA with 100% allocation, 75bps AMC and no policy fees - I haven't come accross a better value PRSA.

Whether or not a PRSA offers the best value pension product is an entirely different question...


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## gnf_ireland (21 Aug 2019)

@Sarenco thanks for that. Mine is an Executive Pension so guess I would be comparing apples and oranges anyway


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## Sarenco (21 Aug 2019)

Hi @gnf_ireland 

Long time, no hear.

Would you be willing to share the terms of your own pension contract with us for comparison purposes?

I don't see anything remotely selfish about seeking out the most competitive deal for any product or service.

Surely that's how market capitalism is supposed to work, no?


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## gnf_ireland (21 Aug 2019)

@Sarenco yes it has been a while. Not as active on the site these days - life just got a bit busier I guess

Yeah, I have no issue in sharing certain levels of detail on the pension contract I have.

Executive Pension with Zurich, via a broker set up in 2016
Regular Contributions have an AMC of 0.75%, 100% allocations and no other charges other than 8 euro a year to Pension Board. Exit charges of 5-1% over a 5 year period
Balance transferred in has an AMC of 0.5%, 101.5% allocation with no other charges. Exist charges are 4-1% over 4 years

I am sure there is better out there, but that is the deal I got at the time, comparing against 3 different brokers !


Feel free to offer the same detail back in return


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## Sarenco (21 Aug 2019)

gnf_ireland said:


> @Sarenco Feel free to offer the same detail back in return


Happy to do so.

Personal pension, 99% allocation on new contributions, 0.4125% AMC (I appreciate that looks odd), €150pa policy fee.

I also have a smaller BOB, AMC of 0.75%, no policy fee.


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## Sarenco (21 Aug 2019)

gnf_ireland said:


> @Sarenco yes it has been a while. Not as active on the site these days - life just got a bit busier I guess
> 
> Yeah, I have no issue in sharing certain levels of detail on the pension contract I have.
> 
> ...


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## gnf_ireland (21 Aug 2019)

@Sarenco ha ha !


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## Sarenco (21 Aug 2019)

Sorry, not sure what happened there.  

Anyway, response in the post above...


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## gnf_ireland (22 Aug 2019)

Sarenco said:


> Personal pension, 99% allocation on new contributions, 0.4125% AMC (I appreciate that looks odd), €150pa policy fee.


Great AMC on that one - fair play !


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## Zenith63 (22 Aug 2019)

Sarenco said:


> A PRSA with 100% allocation, 75bps AMC and no policy fees - I haven't come accross a better value PRSA.


Just to be clear, my pension (brokers quoting 1.25%, same plan direct from Zurich at 0.75%) is an EPP, not a PRSA.


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## GSheehy (22 Aug 2019)

Zenith63 said:


> Just to be clear, my pension (brokers quoting 1.25%, same plan direct from Zurich at 0.75%) is an EPP, not a PRSA.



In the interest of further clarity: i) Was there a minimum contribution level eg €30 per month and ii) Are there exit penalties on your contract iii) Policy Fee?


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## SPC100 (22 Aug 2019)

FYI  - It looks like Zurich does have a .75% 0% contribution charges product -  from The [broken link removed] 

Zurich PRSA -- RFAJ    Regular - Individual        0% (Contribution)        0.75% (amc)
(APP/J/369/S)                    

They have about 100 products listed and maybe 4 of them are at .75%

Now how you access it is a different story...


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## GSheehy (23 Aug 2019)

I had a chance to look at the mythical (EPP) pension product pricing structure that's the subject of this post.

It's of paramount importance that all the information is made available so that the folk that read these posts can make an informed decision.


The minimum contribution is €30 per month
There is a policy fee of €3.50 per month
There is a Pension Authority Fee of €8 pa
There are reducing early surrender/transfer charges in the first 5 years of 5%, 4%, 3%, 2%, 1%
You can buy it with 100% allocation and 0.75% AMC ( on the Matrix Range of Funds) - I doubt too many are 'sold'.
The Director of the Company is the Trustee - IMHO the rules on this will change and Directors will have to appoint (and pay for) external Trustees or pay the provider for that service. Or, revert to a PRSA.
You can buy the above without the policy fee and surrender/transfer charges, and with the cost of Trusteeship included, via an execution only/discount broker website on the following terms i) 100% allocation and 1% AMC or ii) 100% allocation and 0.75% AMC if the contribution is €500pm or more.


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## gnf_ireland (23 Aug 2019)

@GSheehy  out of curiosity, what would you consider to be a '_good deal_' for an Executive Pension and/or PRSA?

I appreciate everyone has different levels of pension pots and contributions, but as a general rule of thumb....


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## Blackrock1 (23 Aug 2019)

gnf_ireland said:


> @GSheehy  out of curiosity, what would you consider to be a '_good deal_' for an Executive Pension and/or PRSA?
> 
> I appreciate everyone has different levels of pension pots and contributions, but as a general rule of thumb....



i think the point is you get a better deal at >500 pm via a broker


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## Zenith63 (23 Aug 2019)

GSheehy said:


> I had a chance to look at the mythical (EPP) pension product pricing structure that's the subject of this post.
> 
> It's of paramount importance that all the information is made available so that the folk that read these posts can make an informed decision.
> 
> ...


Mythical?

FYI Zurich will act as trustee for €5 per month which is (currently) waived.

Out of interest I thought I'd do a very rough calculation of the fees for these various options so people can compare them.  Assuming €1000 p/m contributions over 35 years, 5% growth p/a, which takes you to a pension pot of about €1m -

Original pension I was offered via a broker (1.25% AMC, €3 p/m plan fee) (there was also a 2% "initial" fee which I have not factored in as I don't know how it is applied) - *€181k* in AMCs and fees
Direct with Zurich (0.75% AMC, €3.50 p/m plan fee)- *€109k*
Execution-only discount broker option 1 mentioned by GSheey - *€144k*
Execution-only discount broker option 2 mentioned by GSheey - *€108k*

@GSheehy - Can you share who the execution-only broker is please?


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## gnf_ireland (23 Aug 2019)

Blackrock1 said:


> i think the point is you get a better deal at >500 pm via a broker


Fair enough, but what is considered a good deal via a broker?
When I moved mine in 2016, I got 3 different brokers to give me a quote and to be honest ranged a good bit. I eliminated the most expensive and asked the remaining two what was the best they could do (last opportunity with best and final offer), as otherwise they would be eliminated. Both provided better deals and I eliminated the worst of the two. 

The eliminated one said they could do better, and I asked why they had not given their best one in the last offer !
Its not necessarily a race to the bottom, but its very difficult for people outside the industry to get an idea of what others pay for pensions - and over a 30-40 year window, the prices can rock up !


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## Zenith63 (23 Aug 2019)

Blackrock1 said:


> i think the point is you get a better deal at >500 pm via a broker


Barely.  €1k over the 35 year life of the pension based on the figures given here.  Yes you get rid of the early encashment penalties, but lets be honest how many people setting up a pension for 20/30/40 years encash them in the first five.


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## gnf_ireland (23 Aug 2019)

Zenith63 said:


> Yes you get rid of the early encashment penalties, but lets be honest how many people setting up a pension for 20/30/40 years encash them in the first five.


Yes but you can change providers. I have done it twice so far with my pension. I accept I probably made a mistake initially going with BOI Life, but later moved it to New Ireland who offered the best deal at the time and subsequently moved it to Zurich. As the pension pots grows, I find better deals tend to be available so the flexibility to move is something to keep in mind. 

I have two years left until the early encashment penalties expire and will review at that stage what I will do then. I may not switch, but I will look at the best options on the market and how the funds have performed in the previous 5 years, especially against market indexes.

Its likely a point will come, at some stage, where I will consider a self administered pension and a passive investment approach using EFT's - maybe !! Depending on the size of the pension pot !


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## Sarenco (23 Aug 2019)

Zenith63 said:


> Execution-only discount broker option 1 mentioned by GSheey - *€144k*
> Execution-only discount broker option 2 mentioned by GSheey - *€108k*


There's obviously a big difference between Option 1 and Option 2.

I wonder do any discount brokers have a similar tiered fee arrangement for PRSAs?


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## GSheehy (23 Aug 2019)

Sarenco said:


> There's obviously a big difference between Option 1 and Option 2.



Why would you buy option 1 when you have €1,000pm to contribute?


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## Sarenco (23 Aug 2019)

GSheehy said:


> Why would you buy option 1 when you have €1,000pm to contribute?


Well, you wouldn't obviously.

Do you offer any similar reduction in your commission for PRSAs with contributions above €500pm?  Of where the overall fund size reaches a particular level?


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## GSheehy (23 Aug 2019)

gnf_ireland said:


> @GSheehy  out of curiosity, what would you consider to be a '_good deal_' for an Executive Pension and/or PRSA?
> 
> I appreciate everyone has different levels of pension pots and contributions, but as a general rule of thumb....



You've appear to have a good relationship with the intermediary you used last time (Post #7).

Non-PRSA products are evolving and becoming more competitive all the time as they don't have the regulatory overhang of additional costs on PRSAs.


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## GSheehy (23 Aug 2019)

Sarenco said:


> Well, you wouldn't obviously.
> 
> Do you offer any similar reduction in your commission for PRSAs with contributions above €500pm?  Of where the overall fund size reaches a particular level?



For PRSAs, I don't.  That's not to say they're not available, but I can't get a provider to budge on PRSAs.  

Personal Pensions (RACs) are the same terms as the above (100% / 0.75% ) for EPPs - without the Pension Authority Fee.


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## Steven Barrett (23 Aug 2019)

GSheehy said:


> I had a chance to look at the mythical (EPP) pension product pricing structure that's the subject of this post.
> 
> It's of paramount importance that all the information is made available so that the folk that read these posts can make an informed decision.
> 
> ...



And don't forget to mention, there's a 10% commission payable of the first year's contribution. And 10% of any subsequent increases. 


Steven
www.bluewaterfp.ie


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## GSheehy (23 Aug 2019)

SBarrett said:


> And don't forget to mention, there's a 10% commission payable of the first year's contribution. And 10% of any subsequent increases.
> 
> 
> Steven
> www.bluewaterfp.ie



On the mythical one, yes.

Not on the execution only/discount broker one. That's the same as the execution only PRSA deal where the broker is paid out of the AMC quoted.


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## Zenith63 (23 Aug 2019)

Not sure which pension you’re referring to Steven, but no 10% commission on the one I have?

GSheey could you name the discount broker you are quoting these figures from please, lest this pension you describe becomes the actually mythical pension in this thread?


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## Zenith63 (23 Aug 2019)

GSheehy said:


> Why would you buy option 1 when you have €1,000pm to contribute?


As this discussion started in another thread around the difference between broker vs direct (and now execution only) and the effect of small differences in trailing AMCs, I thought it would be a good opportunity to highlight again that 0.25% sounds like a small difference but really matters.


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## Sarenco (23 Aug 2019)

Zenith63 said:


> I thought it would be a good opportunity to highlight again that 0.25% sounds like a small difference but really matters.


That's for sure.

But I think you would have to concede that this thread also shows that when it comes to pension products, there is no real advantage in dealing directly with insurers.

Broker/agent commissions are pretty much unavoidable.


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## gnf_ireland (23 Aug 2019)

GSheehy said:


> You've appear to have a good relationship with the intermediary you used last time (Post #7).
> 
> Non-PRSA products are evolving and becoming more competitive all the time as they don't have the regulatory overhang of additional costs on PRSAs.


Will still do a competitive benchmark in 2 years time, and see what the story is then. No harm in at least checking how things are going every 5 years


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## gnf_ireland (23 Aug 2019)

Sarenco said:


> But I think you would have to concede that this thread also shows that when it comes to pension products, there is no real advantage in dealing directly with insurers.
> 
> Broker/agent commissions are pretty much unavoidable.


Maybe, but the key is to shop around and get quotes from a number of people and see what the best available deal is - no difference really to what anyone should do with any financial decision - and then review it periodically to see whether its competitive and makes sense to switch! Same logic should agree for mortgages, pensions, loans, utilities etc in my world

I guess most people assume that industry insiders have access to information the rest of us don't and therefore have much better deals than we do !


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## Zenith63 (23 Aug 2019)

Sarenco said:


> That's for sure.
> 
> But I think you would have to concede that this thread also shows that when it comes to pension products, there is no real advantage in dealing directly with insurers.
> 
> Broker/agent commissions are pretty much unavoidable.


To be honest I think this thread is at about the point things were when I started looking at pensions and was reading online previously - people are talking about products that are supposedly cheaper but are not naming them, so the consumer is no better off.  The only product that somebody can actually pick up the phone and call about right now is the one I've named, the others are currently mythical.


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## Steven Barrett (23 Aug 2019)

Zenith63 said:


> Not sure which pension you’re referring to Steven, but no 10% commission on the one I have?
> 
> GSheey could you name the discount broker you are quoting these figures from please, lest this pension you describe becomes the actually mythical pension in this thread?



I've looked up the rates that you have on the Zurich Life broker site and there's a 10% commission paid to the direct sales fella who sold you the policy. These guys eat what they kill, so there's no benefit in them setting it up for free.


Steven
www.bluewaterfp.ie


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## Steven Barrett (23 Aug 2019)

Sarenco said:


> That's for sure.
> 
> But I think you would have to concede that this thread also shows that when it comes to pension products, there is no real advantage in dealing directly with insurers.
> 
> Broker/agent commissions are pretty much unavoidable.



As I have stated before, the insurance companies get their business through the broker market (whether it's their own direct sales team or through multi agency advisors). At present, they won't undercut that market. And yes, there is no advantage in going direct. The pricing options available are the same. 

But commissions are avoidable but it is nigh on impossible to do it yourself. So even if you know what you are doing and don't want any advice, if you want to do it on a commission free basis, you will have to go through an advisor. That advisor is compelled to create a file for you and has to spend time in setting up the policy for you, which there will be a fee for. I have lots of clients who pay me fees and there's no commission taken from their policies. 


Steven
www.bluewaterfp.ie


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## Sarenco (23 Aug 2019)

SBarrett said:


> But commissions are avoidable but it is nigh on impossible to do it yourself


Point taken Steven.

Perhaps it would have been more accurate to say that broker/agent fees/commissions are pretty much unavoidable.


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## Zenith63 (23 Aug 2019)

SBarrett said:


> I've looked up the rates that you have on the Zurich Life broker site and there's a 10% commission paid to the direct sales fella who sold you the policy. These guys eat what they kill, so there's no benefit in them setting it up for free.
> 
> 
> Steven
> www.bluewaterfp.ie


Would love you to explain this further please?  There was no mention of 10% anything in discussions I had with Zurich and I can see my full contributions showing up each month.  So from a consumer point of view, I am paying 0.75% AMC instead of 1.25% to put say €1000 a month into PRISMA5 or whatever I choose.

Are you saying that out of that 0.75%, a 10% commission is paid to the agent? Or that the money for the 10% comes out of the internal fees within the funds? It would seem that either of these scenarios are irrelevant to me the consumer as it still comes down to 0.75% vs 1.25% of my fund going to the AMC. If you’re saying there is some hidden 10% charge that I’m going to see stripped from my pension at the end of the year, then I’ll be on to Zurich first thing in the morning?


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## Steven Barrett (26 Aug 2019)

Zenith63 said:


> Would love you to explain this further please?  There was no mention of 10% anything in discussions I had with Zurich and I can see my full contributions showing up each month.  So from a consumer point of view, I am paying 0.75% AMC instead of 1.25% to put say €1000 a month into PRISMA5 or whatever I choose.
> 
> Are you saying that out of that 0.75%, a 10% commission is paid to the agent? Or that the money for the 10% comes out of the internal fees within the funds? It would seem that either of these scenarios are irrelevant to me the consumer as it still comes down to 0.75% vs 1.25% of my fund going to the AMC. If you’re saying there is some hidden 10% charge that I’m going to see stripped from my pension at the end of the year, then I’ll be on to Zurich first thing in the morning?



The person who sold you the pension would have received €1,200 in commission for setting up the policy for you. Zurich Life recoup that €1,200 from the 0.75% amc. If there is no commission paid, the 0.75% is lower. 

Nothing is stripped from your pension at the year end, fees are deducted on a monthly basis. 


Steven
www.bluewaterfp.ie


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## GSheehy (26 Aug 2019)

Sarenco said:


> But I think you would have to concede that this thread also shows that when it comes to pension products, there is no real advantage in dealing directly with insurers.



Indeed. 

The thread title should be amended, as it's misleading.


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## Zenith63 (26 Aug 2019)

SBarrett said:


> The person who sold you the pension would have received €1,200 in commission for setting up the policy for you. Zurich Life recoup that €1,200 from the 0.75% amc. If there is no commission paid, the 0.75% is lower.


Thanks for explaining.  I don’t really have an issue with that tbh, the only thing I have been calling out is the difference between a 1.25% pension and the 0.75% option that many people aren’t aware of. What the pension provider does with that 0.75% is of little interest to the consumer, unless there is a way of going lower, which I haven’t seen.


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## Zenith63 (26 Aug 2019)

GSheehy said:


> The thread title should be amended, as it's misleading.


Yeah goodness only knows where that title came from .

Are you going to share who this discount broker is that you’ve quoted figures from above GSheehy?


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## GSheehy (26 Aug 2019)

Zenith63 said:


> Are you going to share who this discount broker is that you’ve quoted figures from above GSheehy?



Seeing as no one else is prepared to, I suppose I'll have to  

Go to the 'Recommended Advisors ......' Forum

Click on the first pinned thread - 'Discount Brokers'

Scroll down to post #14


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## Zenith63 (26 Aug 2019)

GSheehy said:


> Seeing as no one else is prepared to, I suppose I'll have to
> 
> Go to the 'Recommended Advisors ......' Forum
> 
> ...


Great thanks.

So just for the benefit of people coming across this thread in future (as I’m sure they will with that tasty title  ), the discount site you are referring to is your site https://prsa.ie. More info in this post - https://www.askaboutmoney.com/threads/discount-brokers.20477/post-1600775

Seems like a great deal and I wish I’d come across it when I setup my pension, at the very least could have saved me a few months looking until I was pointed to Zurich directly, and as you say your offering is better again.


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## Steven Barrett (26 Aug 2019)

Zenith63 said:


> Thanks for explaining.  I don’t really have an issue with that tbh, the only thing I have been calling out is the difference between a 1.25% pension and the 0.75% option that many people aren’t aware of. What the pension provider does with that 0.75% is of little interest to the consumer, unless there is a way of going lower, which I haven’t seen.



Of course they can go lower. Part of the management fee pays for the commission paid out. If there's commission, there's a lower management fee.
If they don't have to recoup a commission.  

The 1.25% you were quoted is the cost of a pension under the business model of the advisors you spoke to. Other advisors will have a different business model and can off different priced pensions. All advisors have access to the same basic charging structures. 

Steven
www.bluewaterfp.ie


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## Zenith63 (26 Aug 2019)

SBarrett said:


> Of course they can go lower. Part of the management fee pays for the commission paid out. If there's commission, there's a lower management fee.
> If they don't have to recoup a commission.


I understand that Zurich could go lower, and it would be great if somebody took up that cause to get AMCs down.  But from the consumers perspective 0.75% is the lowest option in the market right now, and whether Zurich pay 10%/20%/30% commission to agents is not really of much concern to me in ensuring I get the cheapest pension I can get today.


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## Sarenco (26 Aug 2019)

Zenith63 said:


> ...from the consumers perspective 0.75% is the lowest option in the market right now...


Not really.

Friends First (now Aviva) have a contract with an AMC as low as 0.4%, with a policy fee of €150pa.

Now, you would have to go through a broker to access that policy so there will be a commission/fee payable to the broker.  But, as you correctly point out, reducing the AMC has a far bigger impact as the fund grows in size.


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## Steven Barrett (26 Aug 2019)

Zenith63 said:


> I understand that Zurich could go lower, and it would be great if somebody took up that cause to get AMCs down.  But from the consumers perspective 0.75% is the lowest option in the market right now, and whether Zurich *pay 10%/20%/30% commission to agents is not really of much concern to me* in ensuring I get the cheapest pension I can get today.



The two are linked!! You are paying the commission. Zurich Life recoup is from your policy over the lifetime of your policy. 

If allocations rates and commissions were done away with, the management charge would be lower. There are contracts available at 0.5% and 0.4% (for certain funds, no policy fee). But as Sarenco has stated, for an advisor to set one up for you, they'd have to charge you for it.


Steven
www.bluewaterfp.ie


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## Zenith63 (26 Aug 2019)

SBarrett said:


> The two are linked!! You are paying the commission. Zurich Life recoup is from your policy over the lifetime of your policy


I understand that, but if there's nothing I can do about that then it is what it is, as I say, great if somebody can take up that fight.  What I can influence though is choosing a 0.75% AMC pension over a 1%/1.25%/1.5%.

Interesting re. the 0.4/0.5% pensions.  I wonder is there a broker out there that would setup a pension for us somewhere between their cost (0.4%) and the cheapest I found in the market (0.75%)?  If not then it's a moot point, if so then they should be getting their name out here.


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## Sarenco (26 Aug 2019)

Zenith63 said:


> I wonder is there a broker out there that would setup a pension for us somewhere between their cost (0.4%) and the cheapest I found in the market (0.75%)?  If not then it's a moot point, if so then they should be getting their name out here.


There's no trail commission on that policy - you pay a commission on contributions (so you get a lower allocation) or pay your broker a fee out of after-tax money.  As Steven says, the two are linked.

Again, the lower AMC is far more important once your fund reaches any kind of decent size - 0.75% is not the cheapest AMC in the market.


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## Sunny (26 Aug 2019)

SBarrett said:


> The two are linked!! You are paying the commission. Zurich Life recoup is from your policy over the lifetime of your policy.
> 
> If allocations rates and commissions were done away with, the management charge would be lower. There are contracts available at 0.5% and 0.4% (for certain funds, no policy fee). But as Sarenco has stated, for an advisor to set one up for you, they'd have to charge you for it.
> 
> ...



Ok so and advisor has to set one up for me. I currently have a buy out bond worth about 300k with Zurich that I am paying 0.75% AMC. For me to access the cheaper deals like the one mentioned from Aviva, I would have to go to a broker. Lets say I go to you and from looking at your website, it looks like you will charge me 2% upfront fee so 6k to set up the pension. You also receive 0.5% AMC for ongoing advice so the fund with a AMC of 0.4% will actually be 0.9% to pay your trail fee. I am not questioning your fees. Just trying to see if my understanding is correct.


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## Sarenco (26 Aug 2019)

Take a simple example:-

Contract A – 100% allocation; 0.75% AMC;
Contract B – 99% allocation; 0.50% AMC.

On Contract A, the broker receives a rebate of 0.25% per annum from the AMC. On Contract B, the broker receives 1% of each contribution but there's no rebate from the AMC.

In other words, the allocation rate/AMC are linked.

For a large single premium policy (such as a €300k buy out bond) you should be able to get a net allocation of 100% with an AMC of 0.75% or less.


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## Sunny (26 Aug 2019)

Sarenco said:


> Take a simple example:-
> 
> Contract A – 100% allocation; 0.75% AMC;
> Contract B – 99% allocation; 0.50% AMC.
> ...



Yeah I understand that. What I am struggling to understand is an active fund with a 0.4% AMC. First off, the AMC of 0.4% seems very low to cover the fund management costs not to mention the costs of actually running the fund. Are we sure there aren't other charges hidden away?? If an advisor is charging 0.5% AMC to cover the cost of ongoing advice when I am invested in a fund charging 0.4% AMC, I can't see if the fund is suspiciously cheap or the advisor is extremely expensive.  (Not having a go Stephen. I understand the 0.5% for the advice is probably optional and you are very transparent with the costs etc.) I am just genuinely suspicious of 0.4% fund cost.


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## Sarenco (26 Aug 2019)

Sunny said:


> What I am struggling to understand is an active fund with a 0.4% AMC


I didn't say anything about it being an active fund or the cost of ongoing advice!  

Also, an AMC doesn't capture all fund costs but that's a whole other conversation...


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## Sunny (26 Aug 2019)

Sarenco said:


> I didn't say anything about it being an active fund or the cost of ongoing advice!
> 
> Also, an AMC doesn't capture all fund costs but that's a whole other conversation...



True but I bet it describes itself as active otherwise there is no management charge if we are saying the AMC is just the fund managers cost and not the total expense ratio which is usually never discussed as the majority of charges are hidden away in the NAV. Not to mention how all these so called active funds are about as active as me on a Sunday morning!


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## Sarenco (26 Aug 2019)

Sunny said:


> True but I bet it describes itself as active otherwise there is no management charge if we are saying the AMC is just the fund managers cost and not the total expense ratio which is usually never discussed as the majority of charges are hidden away in the NAV.


No, the funds at this particular AMC are index trackers - they are not actively managed.

TERs are not disclosed for unit-linked funds (regardless of whether the investment strategy is active or passive).


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## Sunny (26 Aug 2019)

Sarenco said:


> No, the funds at this particular AMC are index trackers - they are not actively managed.
> 
> TERs are not disclosed for unit-linked funds (regardless of whether the investment strategy is active or passive).


 

Ok so what is the AMC for then? What does it cover in these funds if it doesn't cover all the fund expenses? Especially if they are then also charging you a policy fee. 

Again you have a 40bps index tracker fund that can only be got through brokers who will charge you 50bps for ongoing advice if that's what you want. So providing advice is actually more expensive than managing your actual pension with all associated trading which even passive funds have, compliance and operational costs. I guess I just dont understand the pricing here.


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## Sarenco (26 Aug 2019)

AMC stands for Annual Management Charge.  It doesn't cover all fund costs, for example the costs associated with trading underlying securities.

The cost of ongoing advice is extra again.  I don't pay anything for ongoing advice because I don't want ongoing advice.


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## Steven Barrett (27 Aug 2019)

Sunny said:


> Ok so and advisor has to set one up for me. I currently have a buy out bond worth about 300k with Zurich that I am paying 0.75% AMC. For me to access the cheaper deals like the one mentioned from Aviva, I would have to go to a broker. Lets say I go to you and from looking at your website, it looks like you will charge me 2% upfront fee so 6k to set up the pension. You also receive 0.5% AMC for ongoing advice so the fund with a AMC of 0.4% will actually be 0.9% to pay your trail fee. I am not questioning your fees. Just trying to see if my understanding is correct.



That is correct. Lower % fees are charged for larger cases. As you can see from these threads, the charging structures are very complex and not that straight forward. 

I know some will argue that people should all be charged the same flat fee but what happens to a 25 year old who is on a lowish income and wants good advice to start saving for retirement? Charge them a fee they can't afford and they end up at a bank who will charge them more.




Sunny said:


> Ok so what is the AMC for then? What does it cover in these funds if it doesn't cover all the fund expenses? Especially if they are then also charging you a policy fee.
> 
> Again you have a 40bps index tracker fund that can only be got through brokers who will charge you 50bps for ongoing advice if that's what you want. So providing advice is actually more expensive than managing your actual pension with all associated trading which even passive funds have, compliance and operational costs. I guess I just dont understand the pricing here.



The AMC is made up of three parts:

1. Costs of running a life insurance company - staff wages, light & heat etc
2. Broker commission/ allocation rates - we see this with options where there is an allocation rate of 105%, the base amc is 1%. Where the allocation rate is 100%, the base amc may be 0.4% or 0.5%. 
3. Profit

If allocation rates were done away with, the charging structures would be a lot more straight forward. If you wanted to pay fees through your pension, you could just deduct it from the premium. Otherwise write a cheque. Management fees would be lower and everything would be clearer. 


Steven 
www.bluewaterfp.ie


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## plantrepair (3 Sep 2019)

SBarrett said:


> The AMC is made up of three parts:
> 
> 1. Costs of running a life insurance company - staff wages, light & heat etc
> 2. Broker commission/ allocation rates - we see this with options where there is an allocation rate of 105%, the base amc is 1%. Where the allocation rate is 100%, the base amc may be 0.4% or 0.5%.
> ...



Apologies for jumping into this thread. I've been wondering if the AMC is the full charge and I'm guessing not. 
I'm looking at a KIDD document at the moment on a recommended fund where they mention a number of charges including a once off entry fee of 0.93%, ongoing annual portfolio costs(or impact on return as its described) are 1.83% plus transaction costs of .09%
The annual charge I was quoted was 1%. 
So is my annual charge the 1% AMC *or *this 1% plus  the 1.83% +.09%. 
To me impact on return and charge/fee are the same 
Thanks


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## Zenith63 (20 Dec 2019)

plantrepair said:


> Apologies for jumping into this thread. I've been wondering if the AMC is the full charge and I'm guessing not.
> I'm looking at a KIDD document at the moment on a recommended fund where they mention a number of charges including a once off entry fee of 0.93%, ongoing annual portfolio costs(or impact on return as its described) are 1.83% plus transaction costs of .09%
> The annual charge I was quoted was 1%.
> So is my annual charge the 1% AMC *or *this 1% plus  the 1.83% +.09%.
> ...


Not sure what provider/KIDD you're looking at, but for my Zurich pension they mentioned at setup time to "please note Zurich offers additional 'external funds' managed by outside fund managers which accrue an additional management charge".  So in your example I'd imagine the 1.83%+0.09% is charged within the fund, then an additional 1% is charged by your pension provider.


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## Zenith63 (20 Dec 2019)

Wonder if somebody can help explain this for me?  I came across it while looking through old emails when setting up the pension I discussed in this thread (a Zurich EPP) -
"The annual fund management charge applicable is 0.75% as follows - 0.4% is deducted in the price declared, therefore the declared unit price is the bid price after this 0.4% deduction.  The additional 0.35% is deducted by way of cancellation of units.  Please note there is no bid/offer spread."

I can see that the 0.35% cancellation of units will in-effect take 0.35% out of my pension pot each year, makes sense.  The 0.4% deducted from the price declared though, this sounds like it would only impact you when you buy/sell rather than being a further 0.4% hit on your pot each year, or what am I missing?

Thanks!


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## Conan (20 Dec 2019)

The 0.4% is deducted from unit price each month before declaring. So the unit price is net of the ongoing 0.4% each year.
The 0.35% charge is deducted by actually encasing units, ie reducing the number of units. 
Overall the net effect is a charge of 0.75% pa.


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## LDFerguson (20 Dec 2019)

Zenith63 said:


> The 0.4% deducted from the price declared though, this sounds like it would only impact you when you buy/sell rather than being a further 0.4% hit on your pot each year, or what am I missing?



Simplified example - let's say the assets within the fund grow by 4% in value in a given year.  The unit price of the fund will go up by 3.6% per year.  So it doesn't only hit you when you sell.  

The reason for this system is that Zurich Life have plenty of different charging structures available for different products.  For individual customers, their standard annual charges range from 0.5%, through your 0.75% to over 1% for some.  This allows them to use the same fund for all contracts, regardless of charging on the contract.  So on yours they take 0.4% out of the fund and 0.35% out of your specific policy.  If you were in a contract with a 1% overall annual charge, they would get their 0.4% from the fund and an additional 0.6% from the individual policy.  

Hope that makes sense.  

Regards, 

Liam
www.ferga.com


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