# PRSA commission charges



## joeblogs (20 Oct 2006)

What can you do if you've already signed up for a PRSA and you are paying a 5% commission charge on monthly contributions?

For instance, I am currently with Eagle Star (Default Investment Strategy) and I am paying a 5% commission charge. However, I would now rather change my pension over to an Irish Life one as they are offering a 0% commission option through LA Brokers. Moreover, I have just noticed that they are providing a similar product (i.e. 0% commission) via Eagle Star as well. It's a bit weird if I ask the (new) broker to not change my pension company, but just the pension product within the same company? Would the pension company even allow you to do this? (my current broker mightn't be too happy either) 

I would rather stay with Eagle Star if I can, however, I do not want to pay an on-going 5% commission charge. 

BTW, do you think that there is any difference between the non-commission based PRSAs and their 5% counterparts? Are they really the same, except that you do not pay commission on the 0% one? I think that the only difference between them is that you get some advice off the broker when setting up the commission based one. However, when you think about it, that advice is quite expensive when the broker is going to charge you 5% for the life time of the product. It may seem that in such instances that no advice may have been the better option!

Other questions:

1) Bid offer spread:- 0%

What does this mean?


2) If you pay at least €6000 a year and less than €12000 a year then you receive an extra allocation of:- .75%. 

What does "you receive an extra allocation of .75%" mean?

3) Is there a web page on a comparison of how the different PRSA's have performed over the last couple of years?

Thanks,

joeblogs

[Moved from *Re: Execution Only PRSA / Pension Broker]*


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## ClubMan (20 Oct 2006)

joeblogs said:


> For instance, I am currently with Eagle Star (Default Investment Strategy) and I am paying a 5% commission charge. However, I would now rather change my pension over to an Irish Life one
> 
> ...
> 
> I would rather stay with Eagle Star if I can, however, I do not want to pay an on-going 5% commission charge.


Er - which is it? Stay or go?

There is nothing stopping you from parking the _ES _pension and opening a new one with another provider on a 0%/c. 1% contribution charge/annual management basis.

Forget about hurting your broker's feelings. Look out for yourself!


> BTW, do you think that there is any difference between the non-commission based PRSAs and their 5% counterparts? Are they really the same, except that you do not pay commission on the 0% one?


 If they are invested in more or less the same funds then there is no significant difference.


> I think that the only difference between them is that you get some advice off the broker when setting up the commission based one. However, when you think about it, that advice is quite expensive when the broker is going to charge you 5% for the life time of the product. It may seem that in such instances that no advice may have been the better option!


 The broker is not charging the 5% - the underwriter is. Although the underwriter will presumably pay the broker for business out of it. The 5% charge doesn't guarantee advice and many _PRSAs _are sold on an execution only basis. If you need advice then go to an authorised advisor or good multi-agency intermediary and ideally agree a fixed fee for the advice rather than having the intermediary remunerated via commissions which migh bias him/her towards one provider over another regardless of your best interests.

What sort of broker have you been dealing with up to now?


> 1) Bid offer spread:- 0%


 Units in the fund are bought and sold at the same price. Often (with any unit linked fund) there is a bid offer spread of up to about 5% which means that there is a 5% difference between the price at which you buy units at the price at which you sell them. Basically if you bought and sold €100 worth of units then you would end up with €95. With a _B/O _spread of 0% you get your €100 back. Hypothetical example since you would not normally buy and sell immediately like this.


> 2) If you pay at least €6000 a year and less than €12000 a year then you receive an extra allocation of:- .75%.
> 
> What does "you receive an extra allocation of .75%" mean?


 Presumably that they top your contribution up by 0.75%?


> 3) Is there a web page on a comparison of how the different PRSA's have performed over the last couple of years?


 If there is then don't pay too much attention since past performance is no guide to future returns. Better to concentrate on minimising charges and choosing a fund suited to your needs (e.g. perhaps a high risk/reward/equity content fund if you have a good while to go to retirement).


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## joeblogs (8 Nov 2006)

Sorry for such a delay in getting back to you ClubMan. My wife and I have just had our first child - a baby girl - so things, as you can imagine, have been a bit hectic. Anyway, on with the post... Thanks for you reply. Find comments below.



ClubMan said:


> Er - which is it? Stay or go?
> 
> There is nothing stopping you from parking the _ES _pension and opening a new one with another provider on a 0%/c. 1% contribution charge/annual management basis.


 
So it should be fine to switch brokers, but keep the same Eagle Star (ES) product. I thought that ES might object, but now that you mention it, they shouldn't really care.



> Forget about hurting your broker's feelings. Look out for yourself!


 
Forgotten about his feelings already ;-)



> If they are invested in more or less the same funds then there is no significant difference.
> 
> The broker is not charging the 5% - the underwriter is. Although the underwriter will presumably pay the broker for business out of it. The 5% charge doesn't guarantee advice and many _PRSAs _are sold on an execution only basis. If you need advice then go to an authorised advisor or good multi-agency intermediary and ideally agree a fixed fee for the advice rather than having the intermediary remunerated via commissions which migh bias him/her towards one provider over another regardless of your best interests.


 
ok, so you are saying there is not much difference between the execution-only and the commission based products. Also, it is better to use a broker who charges a fixed fee, instead of one that incurs an on-going commission charge as the former will more probably proffer impartial advice. This seems fair enough.



> What sort of broker have you been dealing with up to now?


 
An expensive one ;-) One working for a bank.



> Units in the fund are bought and sold at the same price. Often (with any unit linked fund) there is a bid offer spread of up to about 5% which means that there is a 5% difference between the price at which you buy units at the price at which you sell them. Basically if you bought and sold €100 worth of units then you would end up with €95. With a _B/O _spread of 0% you get your €100 back. Hypothetical example since you would not normally buy and sell immediately like this.


 
I guess that this means that the allocation is 100%.



> Presumably that they top your contribution up by 0.75%?


 
Don't quite get this. If the policy is a 100% allocation then you would be getting 100.75%, which would mean that they are giving you free units? This would only seem to make sense if you started off at 95% allocation (or something similar) and then you move to 95.75% possibly?



> If there is then don't pay too much attention since past performance is no guide to future returns. Better to concentrate on minimising charges and choosing a fund suited to your needs (e.g. perhaps a high risk/reward/equity content fund if you have a good while to go to retirement).


 
Fair enough. Again, thanks for the advice ClubMan.


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## ClubMan (8 Nov 2006)

joeblogs said:


> Sorry for such a delay in getting back to you ClubMan. My wife and I have just had our first child - a baby girl - so things, as you can imagine, have been a bit hectic.


Congratulations. Was in that position just over a year ago and it's been great fun since (seriously).


> An expensive one ;-) One working for a bank.


 Doesn't sound too independent? What bank and what relationship do they have with _ES_?


> I guess that this means that the allocation is 100%.


 If the bid offer spread is 0% and there are no other per contribution charges then yes - the allocation rate is 100%.


> Don't quite get this. If the policy is a 100% allocation then you would be getting 100.75%, which would mean that they are giving you free units? This would only seem to make sense if you started off at 95% allocation (or something similar) and then you move to 95.75% possibly?


 Providers sometimes give you such "free" money (i.e. invest more than 100% of your money) because they will probably make the money back on annual management charges into the future.


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## joeblogs (8 Nov 2006)

ClubMan said:


> Congratulations. Was in that position just over a year ago and it's been great fun since (seriously).


Congratulations too. And one more nappy later...(seriously ;-).


> Doesn't sound too independent? What bank and what relationship do they have with _ES_?


Was a friend of family, so would rather not say. However, it is suffice to say, I've learned that you shouldn't put all your faith in your friend's advice - sense of false security and all that...


> If the bid offer spread is 0% and there are no other per contribution charges then yes - the allocation rate is 100%.
> Providers sometimes give you such "free" money (i.e. invest more than 100% of your money) because they will probably make the money back on annual management charges into the future.


Ok - makes sense. Should be able to make a more informed decision now. Thanks again.


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## F. Kruger (8 Nov 2006)

ClubMan said:


> Providers sometimes give you such "free" money (i.e. invest more than 100% of your money) because they will probably make the money back on annual management charges into the future.


 
On the Eagle Star Standard PRSA the bonus allocations cannot bring the allocation rate above 100%. Bonus allocations do not apply to contracts written as part of a group (including all salary deductions contracts).

Therfore, you cannot end up with an alocation of more that 100%. If thre was a 5% charge on the contribution you would get 95.75%.


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## ClubMan (8 Nov 2006)

Sorry - I was just speaking generally about the possibility of > 100% allocation rates and not specifically about the _ES _offering mentioned above.


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## DirtyH2O (8 Nov 2006)

I almost bought a PRSA myself and was told it was the worst option for anyone putting in a reasonable amount of money. There seems to be very confusing messages emanating. I didn't find the Financial Regulator any use at all as they can only compare the most vanilla options. I think everyone should use a broker once they understand all the variables to be considered such as bid\offer spread, contribution rate + annual management rates, additional charges, insurance options, selection of funds available.
Brokers are the only ones who can\will give a reduction from the maximum charges. I know there are a few mentioned here who seem to be worth considering. I won't mention names 
I thoughtit was possible to negotiate over 100%, if you got the maximum allocation I thought it was c. 102.5%


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## ClubMan (8 Nov 2006)

DirtyH2O said:


> I almost bought a PRSA myself and was told it was the worst option for anyone putting in a reasonable amount of money.


Told by whom? And what specific reasons did they give?


> There seems to be very confusiung messages emanating.


If there are then there shouldn't be. A low charges PRSA (e.g. possibly down to 0% on each contribution and c. 1% annual management charge) with a suitable range of funds to invest in is probably one suitable option for many people.


> I didn't find the Financial Regulator any use at all as they can only compare the most vanilla options. I think everyone should use a broker


What do you mean by broker? Tied agent? Multi-agency intermediary? Authorised advisor?


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## DirtyH2O (8 Nov 2006)

ClubMan said:


> Told by whom? And what specific reasons did they give?
> 
> If there are then there shouldn't be. A low charges PRSA (e.g. possibly down to 0% on each contribution and c. 1% annual management charge) with a suitable range of funds to invest in is probably one suitable option for many people.
> 
> What do you mean by broker? Tied agent? Multi-agency intermediary? Authorised advisor?


 
Pretty much everyone - co-workers, friends in financial services, brokers, man on street. The main reasons were limited fund choices and higher charges (true for me personally). I was taken aback as I had believed PRSA was the only way to go for most people, myself included.

And the OP by the sounds of it now they are effectively paying 6% + in the first year on all contributions. Better than the 60% of old but still not good enough. When I consider all the money being spent on the Financial Regulator and the Pension Board I don't think people are getting the information they require about the best place to buy a pension from them. 

When I say broker I crudely mean anyone who has direct access to the pension companies extranets to complete and print an application and get it approved while getting the best deal possible.


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## ClubMan (8 Nov 2006)

DirtyH2O said:


> Pretty much everyone - co-workers, friends in financial services, brokers, man on street. The main reasons were limited fund choices and higher charges (true for me personally).


You can get a 0%/1% _PRSA _with a good selection of funds (e.g. different risk/reward profiles) for a fixed once off arrangement fee of a few hundred €s. Anybody who issues a blanket dismissal of _PRSAs _is talking rubbish.


> I was taken aback as I had believed PRSA was the only way to go for most people, myself included.


Equally to assume that any single pension option is the only way to go would be foolish. Horses for courses.


> And the OP by the sounds of it now they are effectively paying 6% + in the first year on all contributions.


Where do you get 6% from? You can't simply add the 5% per contribution charge and the annual management fee by the way. That's meaningless.


> Better than the 60% of old but still not good enough.


Yes - so perhaps look at a 0%/1% _PRSA _option. Or a similarly competitive personal pension plan option.


> When I consider all the money being spent on the Financial Regulator and the Pension Board I don't think people are getting the information they require about the best place to buy a pension from them.


This is a separate issue for separate discussion.


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## F. Kruger (8 Nov 2006)

DirtyH2O said:


> , if you got the maximum allocation I thought it was c. 102.5%


 
If a company 'gives' you an allocation of 102.5% and you try to move/transfer the money to another product provider a year later, for whatever reason, they are going to nail you some way. Either by a B/O Spread or 'Early Encashment' penalties. There's none of this crap with a PRSA.


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## Fanny (9 Nov 2006)

*Re: LA PRSA at 0/1%*

It's exactly vice versa for me: I have an Irish life pension at 5%/1% and now have two new 0/1% contracts at home, one for ES and one for Irish Life (via La Broker). 
Even if I chose the exact same Irish Life pension (which would help becasue my employer pays into it!) I could not keep it, I have to freeze that one and open a new LA broker contract! Now payroll does not want to contribute to the new one (they have to deduct, but do not need to contribute!) It looks to me like the 5% PRSAs have been set up via companies for the banks to earn them money! I have asked ES and IL for months about cheaper PRSAs and they act as if excecution only PRSAs were illegal and basically didn't exist. I even brought a catalogue into IL and it clearly stated 0/1% but I was told that kind of product simply did not exist! An ES Cork adviser said that the fee the brokers charge would be an annual fee of 150EUR and that they were screwing me! It is amazing. All the guys who signed up via our company scheme are on 5%/1%, and we were told it was supposed to be easy to change a PRSAs, but it is not. 
I am glad I found out about the 0/1% execution only product and that it is more or less the same, only my company does not support it and IL and ES don't want to talk about it...

Fanny


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## Guest111 (9 Nov 2006)

Nothing ever seems to be clear with pensions. I'm trying to start one now myself but it seems to be a minefield. Are these brokers offering no upfront charges and .5%-1% fees a good bet?


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## Fanny (9 Nov 2006)

I understand that execution only brokers do not want eamils asking questions and do not act as advisors. If I need to feed my SSIA into the nil commission PRSA next year, who would be my actual point of contact? Irish Life/Eagle Star (haven't decided yet) or the broker? Same question if I wanted to make fund changes in the future? 
Fanny


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## Guest111 (9 Nov 2006)

Fanny said:


> I understand that execution only brokers do not want eamils asking questions and do not act as advisors. If I need to feed my SSIA into the nil commission PRSA next year, who would be my actual point of contact? Irish Life/Eagle Star (haven't decided yet) or the broker? Same question if I wanted to make fund changes in the future?
> Fanny


 
What sort of return are you hoping to achieve? Sounds like we're in the same boat...I'd prefer to go with this LA Brokers option but worry that the "advice included" option may be better in the long run if you do want to make changes.


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## extopia (9 Nov 2006)

This old thread sums up my feelings about the whole PRSA business.


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## Fanny (9 Nov 2006)

Whow, Extopia, i have not come across that thread yet! That says it all. 

I have paid 5%/1% for the first year as my employer has suggested this PRSA with Irish Life and they won't contribute to any other! 
But their contribution just about covers the 5% commission for the bank!
As I want to invest my SSIA into a pension (as the government tries to advise people) I must be one of the few who really woke up. They wanted me to pay the full 5% commission on the SSIA lump sum, what a feast for the banks. I am surprised there is no uproar! However, maybe people just vote with their feet and that is why the new government incentive is not as popular as expected. My SSIA only matures next year in April, so I am still not sure whether to
> freeze my PRSA with Irish Life and set up the same with LA Brokers now, losing the company contribution, paying the once off fee now
> wait until April 2006 and see if there are any changes in PRSA rules or pricing
> set up an Eagle Star PRSA via la Brokers instead of the Irish Life one
> leave my PRSA for now and invest the SSIA returns into a privat Quinn Life pension

None of the above seem ideal, and it is totally crazy why i cannot just add the SSIA lump sum to my existing PRSA at low/no charge, or transfer the money from my existing PRSA into a new nil commission PRSA. 
It looks like there is no way around setting up a new pension again (my third one), all with Irish Life Consensus Fund! All different conditions, CRAZY, eh?) So if it is a new one i might give Eagle Star a try?

Fanny


I have three options:



extopia said:


> This old thread sums up my feelings about the whole PRSA business.


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## F. Kruger (10 Nov 2006)

Fanny said:


> If I need to feed my SSIA into the nil commission PRSA next year, who would be my actual point of contact? Irish Life/Eagle Star (haven't decided yet) or the broker? Same question if I wanted to make fund changes in the future?
> Fanny


 
You should contact the company directly. When they issue with the original documentation they will give you on-line/phone contacts.

One thing to remember, if you effect the policy on an execution only basis through a broker, their name will appear as the agent. When you incresase the premium or add once-off contributions to it, make sure that the documentation comes back with 100% allocation on it. The person that is inputting the addition within the life office may not recognise that it is an execution only 0% commission plan.


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## F. Kruger (10 Nov 2006)

So......you are agreeing with me?


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## vue11 (10 Nov 2006)

*Re: LA PRSA at 0/1%*

I have asked ES and IL for months about cheaper PRSAs and they act as if excecution only PRSAs were illegal and basically didn't exist. I even brought a catalogue into IL and it clearly stated 0/1% but I was told that kind of product simply did not exist! An ES Cork adviser said that the fee the brokers charge would be an annual fee of 150EUR and that they were screwing me! It is amazing. All the guys who signed up via our company scheme are on 5%/1%, and we were told it was supposed to be easy to change a PRSAs, but it is not. 
I am glad I found out about the 0/1% execution only product and that it is more or less the same, only my company does not support it and IL and ES don't want to talk about it...

Fanny[/quote]


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## vue11 (10 Nov 2006)

Fanny, this is so great to read as I thought I was the only one with suspicions. I had a meeting recently with a senior Irish life advisor and he deliberately fended off any questions I had about this product. He then went on to tell me that he had just come from a meeting about invsting in irish poperty and how this was a "growth area" and his advise to me was to invest my funds there. The whole experience was insettling and to be honest I didnt trust the guy. I know enough to judge that he probably earns a nice annual bonus for directing pensions into certain funds.... if only I could find a broker I could trust!!!!!


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## F. Kruger (10 Nov 2006)

Fanny, 

You get an 'Execution Only' service from an 'Execution Only' Broker. ILAC ans ES are not interested in charging customers fees for setting up nil commission plans directly with them.

vue11,

What suspicions do you have about the product?


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## Fanny (10 Nov 2006)

Well, I know that they would not be interested in selling them. But they actually go as far as saying nothing like that exists or if it was it was illegal! That is the confusing part. So if I close a deal with a broker and he sends me back to Irish Life what will happen, will they still ignore the product exists and give me alot of hassle if i want to invest the SSIA into it next year, or will i deal with someone else altogether (obviously not the broker!), or will they just change around and treat me like a customer who has found the silver spoon? Once you have a 5%/1% PRSA you are not supposed to find out there is the same for cheaper, and if you ask, they lie. that cannot be right either...?

Fanny


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## F. Kruger (10 Nov 2006)

Let me get this straight.

You don't want to deal with the company directly because they make you feel bad.

You don't want to deal with a broker because you feel the charge on the contribution is too much for the service that they would provide you with.

So what you have to do is find a very nice broker who will meditate between you and the company and charge you nothing for the service.


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## Fanny (11 Nov 2006)

F. Kruger said:


> (You don't want to deal with the company directly because they make you feel bad.)
> 
> This is rubbish, Kruger! They gave me wrong information, wrong facts in the hope I would not find out. Talking about my bad feelings is inaccurate here! I cannot see what IL/ES is responsible for and what not, they told me nil commission PRSAs simply don't exist and warned me not to close my PRSA because I could not get a better deal, it does not leave a good impression. They gave me the impression Execution only brokers were kind of illegal! Now, you might know better after reading the threads, but when you are out there on your own it is not easy to digest.
> 
> ...


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## Guest126 (13 Nov 2006)

Fanny

Irish Life and Eagle Star will only sell you the PRSA with a standard charge - they need this charge to recoup their salesperson cost.

You can hardly expect them to tell you that you should go somewhere else for a 0% cost PRSA - that would not be very smart of them.

We can only go on your word that they said they were illegal, but if they did say such a thing then I think you should have taken the detail of the person who said this and put in a letter to them/their manager for clarification of this.


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