# What is the cheapest index tracking option for a pension investor?



## gbh2930 (10 Oct 2012)

The Zurich TopTech 100 fund tracks the NASDAQ 100 via an ETF for 1% Annual Management Charge

Are there any cheaper index tracking options?

Or what other index trackers are available for same rate?


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## Marc (10 Oct 2012)

Most of the products on sale from insurance companies use an underlying index fund from a specialist fund manager and then they add on their marketing costs.

Depending on your circumstances you might be better off buying the underlying fund directly through a self directed pension.

For example, my pension trustee charges me 0.25%pa and I can buy index funds with annual fees of .2% or .3%pa typically.


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## Marc (16 Nov 2012)

http://www.sensibleinvesting.tv/Default.aspx


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## Dave Vanian (17 Nov 2012)

Marc said:


> Most of the products on sale from insurance companies use an underlying index fund from a specialist fund manager and then they add on their marketing costs.
> 
> Depending on your circumstances you might be better off buying the underlying fund directly through a self directed pension.
> 
> For example, my pension trustee charges me 0.25%pa and I can buy index funds with annual fees of .2% or .3%pa typically.


 
Are these two charges the only ones that a person will pay or are there additional advice fees or other fees that you haven't mentioned in your reply?


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## Marc (17 Nov 2012)

Naturally the fee agreed with any prospective client fully reflects the specific circumstances of the client, and the value added from the advice. Each fee is agreed with each prospective client in writing.

Did you watch the documentary?


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## Dave Vanian (17 Nov 2012)

So, when you were replying above to a question 
*"What is the cheapest index tracking option for a pension investor*?" where the poster is clearly looking to compare costs, why did you mention only *some* of the costs of your offering - the annual charges - and omit others - your fees - until you were called out on it?


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## Marc (17 Nov 2012)

Because not everyone wants or requires an advisory relationship and I wasn't describing my offering. 

However, under a commission based service,  advice and product costs are bundled together and the total costs are opaque including things such as override commissions which are not disclosed to clients. Additional costs are paid whether ongoing advice or service is being provided or not.

Whereas, under a fee based relationship the cost of advice is based on the value of that advice and the ongoing service with product costs separate and transparent. Surely that is a better arrangement?


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## orka (18 Nov 2012)

So wrt the original question, what would the annual management  be on an execution only basis for say a €6,000 pension investment? And what would the fees be?


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## Dave Vanian (18 Nov 2012)

Marc said:


> However, under a commission based service,  advice and product costs are bundled together and the total costs are opaque including things such as override commissions which are not disclosed to clients. Additional costs are paid whether ongoing advice or service is being provided or not.



You seem to misunderstand how a commission-based product works. Let me explain. A commission-based advisor is obliged by law to disclose ALL remuneration he will receive on a transaction. This includes over-ride commission. The only exception to this rule is Occupational Pension Schemes. 

Anyway, I'd be interested to hear your answer to orka's question, this time disclosing ALL charges and fees.


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## Marc (18 Nov 2012)

How could one possibly disclose the monetary amount of all commission payments in advance to a client, when by definition, you do not know how much it is going to be and it depends on how much business is written with a particular company? This is the least transparent payment a broker receives and this is why they are illegal in the UK. 

Whereas under a professional fee relationship

Clients pay product fees and advice fees. These are separate as I have already pointed out.

The product fee is stripped of hidden costs such as overrides, policy fees, initial units, early surrender penalties and other tricks used to conceal the real costs.

Advice is paid for on a fee basis under a letter of engagement with each client (like a Solicitor or accountant) and depends on the scope of the engagement, client specific requirements.


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## Dave Vanian (19 Nov 2012)

Marc said:


> How could one possibly disclose the monetary amount of all commission payments in advance to a client, when by definition, you do not know how much it is going to be and it depends on how much business is written with a particular company? This is the least transparent payment a broker receives and this is why they are illegal in the UK.


 
I'd suggest you learn about how the commission system operates here in Ireland, as you clearly don't understand it.  Let me explain.  *All commissions are disclosed prior to point of sale.*  Over-ride commission is disclosed.  If a broker doesn't receive the over-ride commission at the end of the business year, that's his concern.  If he does, it's been disclosed.  

Anyway, I find it most amusing that having been asked a straight question several times in this thread you still haven't disclosed what the full cost of your offering would be.  So your replies to the original question in this thread would be meaningless to the original poster - all he now knows is that it's possible to get access to index-tracking funds with lower annual charges BUT he has to pay additional fees to access them and we don't know what those additional fees are.  Yet you talk about "hidden charges" on the commission-based system.  

If this is the level of transparency one can expect on a fee-based system, I can see why it's never really taken off in Ireland.


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## Marc (19 Nov 2012)

"Because not everyone wants or requires an advisory relationship and*I wasn't describing my offering    *."

"How could one possibly disclose the *   monetary amount *    of all commission payments in advance to a client, when by definition, you do not know how much it is going to be and it depends on how much business is written with a particular company?"


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## Brendan Burgess (19 Nov 2012)

Folks

Please make sure to respect the Posting Guidelines and not turn a very interesting factual question into a spat. 

As I understand it

Most funds are bought on a full commission basis but no advisory fee is charged. 

Or you can go through a fee based broker and pay a fee for the advice but get the funds on lower commission

Or, if you know the funds you want, you can buy them on an execution-only basis, and pay a very low fee and very low commission

gbh would like to know if anyone can list such funds for his pension scheme. 

Brendan


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## LDFerguson (20 Nov 2012)

gbh2930 said:


> The Zurich TopTech 100 fund tracks the NASDAQ 100 via an ETF for 1% Annual Management Charge
> 
> Are there any cheaper index tracking options?
> 
> Or what other index trackers are available for same rate?


 
What sort of pension product do you need?  Occupational Pension Scheme (a.k.a. Company pension, Directors' pension or Executive Pension), Personal Pension (a.k.a. RAC) or PRSA?  

If you don't know the answer, what type of employment are you in - self-employed, company director or PAYE employee (not a director)?


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## 149oaks (22 Nov 2012)

I've been following this thread for a while.

Brendan summarised it quite well and his last point is still outstanding which was the original question - "gbh would like to know if anyone can list such funds for his pension scheme."

This seems simple to me and shouldn't need all the details regarding type of pension etc to answer it.

Also wouldn't this listing also apply to investors who just simply want to put their spare cash into some passively managed ETF Index Trackers and avoid fees, commissions etc. 

All this debate clouds the simple question, hopefully somebody will attempt a clear and concise list.


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## LDFerguson (22 Nov 2012)

149oaks said:


> This seems simple to me and shouldn't need all the details regarding type of pension etc to answer it.


 
No - there are different charging structures for PRSAs, RACs and Occupational Pension Schemes so the query is relevant. 



149oaks said:


> Also wouldn't this listing also apply to investors who just simply want to put their spare cash into some passively managed ETF Index Trackers and avoid fees, commissions etc.


 
No - if an investment is to be made for a pension, then it must be into a Revenue-approved pension structure, in order to qualify for the tax reliefs. There's a cost of having a Revenue-approved pension structure and that cost differs depending on what type of pension vehicle it is.


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## gbh2930 (27 Nov 2012)

LDFerguson said:


> What sort of pension product do you need?  Occupational Pension Scheme (a.k.a. Company pension, Directors' pension or Executive Pension), Personal Pension (a.k.a. RAC) or PRSA?
> 
> If you don't know the answer, what type of employment are you in - self-employed, company director or PAYE employee (not a director)?



I’m a PAYE employee so PRSA is the appropriate option? Mind you, I’m grey on what the difference is between a PRSA and a Personal Pension and in what circumstances one is more appropriate than the other. It sounds like a self-directed PRSA is the way to go and buy ETF index tracking funds through it? 
Would there be any restrictions on the ETF funds I could buy or pretty much anything goes?

I’m happy to do execution-only basis. What charges should I expect?


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## xjohnom (10 Sep 2013)

*PRSA Fees*

Hi,

This thread looks relevant something that is puzzling me greatly. I made a lump sum contribution to my PRSA and got back a letter confirming my investment etc. On one of the pages it detailed how much of the lump sum was attributable to Intermediary/Sales remuneration. It amounted to about 7% of my lump sum.

Naturally I asked my PRSA provider exactly how much of my money had been actually invested and was cheerfully told that 100.75% was what was actually invested. The 7% remuneration was paid out of the fund and not taken directly from the money I had just contributed.Thus implying it is coming from the management fee. 

Is that how it works? Coz I could not see how the fund would get past the first year on  that basis, paying 7% commission on an annual management fee  of .75%.


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## Steven Barrett (14 Sep 2013)

xjohnom

You are talking about allocation rates here. In some instances, especially for lump sums, insurance companies offer a bonus percentage, which in a lot of cases, the adviser takes as a fee. 

e.g. invest €10,000, the provider gives an allocation rate of 105%. You have your €10,000 invested and the adviser takes the 5% as a bonus. 

PRSA's are quite restrictive in the charges that providers can levy, so I would be surprised if you are paying a higher management fee in exchange for a higher allocation. That is more common in personal and executive pension plans.

There are PRSA's that pay 7% commission for single premiums but your allocation rate would be 95% and not 100.75% as you said. 

Who is your provider and is it a standard or non-standard PRSA? The policy documents that you got from the provider should also state the management charge on your PRSA.


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## LDFerguson (14 Sep 2013)

xjohnom said:


> On one of the pages it detailed how much of the lump sum was attributable to Intermediary/Sales remuneration. It amounted to about 7% of my lump sum.


 
The table that shows intermediary / sales remuneration usually shows it in year 1 and on separate lines, subsequent years.  Is the 7% figure what is being paid in year 1 or over a period of years?  

Did you use a Financial Broker or other intermediary to arrange your PRSA?  If so, you can always ask them how much they're getting.


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