# 5-6yr Savings/Investment Plan



## bfield (3 Jan 2008)

Hi there,

Just looking for some advice on the best savings/investment options over a 5-6 year period. At the moment, this is my situation. I have just opened a FA reg savings a/c and will be saving €700 per month with them. I also have app. €24k in Acorn Life managed funds, into which I am currently investing €300 per month.

I am basically looking for some advice to make the most of the above funds (€24k lump sum + €1,000 per month investment) over a 5-6yr period.

The options I have come to are as follows:
1. Deposit €24k into various lump sum a/c's - FA, Rabo etc. and drip feed into various regular saver a/c's including topping up the existing FA reg savings to max €1,000 per month.
2. Leave the €24k with Acorn Life & continue investing with them aswell as the FA reg savings. The 24k has accumulated over a 6 yr period and while not performing well over the last year, it has done ok over the full period. My total premiums were app €17k, Govt premiums app. €3k and after tax & expenses, it is now worth €24k.
3. Spread the €24k into various funds such as the online Rabo ones. The funds could range from low, medium to high. Top up the FA reg savings to €1,000 per month.

Option 1 seems like a very cautious approach and Im sure I could do better with my money. Option 2 is probably not a bad option, especially since Acorn Life's fees are front loaded and over a 5-6yr period it should perform reasonably well. Option 3 is probably the most riskiest option but Im not risk adverse so would consider it if there is a good chance of high returns.

Any advice would be appreciated and also if there are other options which I could consider.

Thanks.


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## ClubMan (3 Jan 2008)

What charges (per contribution and ongoing/annual) apply to the_ Acorn Life_ funds?


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## bfield (3 Jan 2008)

The charges are 5% of the premium value plus a monthly policy fee of €4.50. So for example, if my monthly premium is €300, only €280.50 goes towards buying units at the offer price.

it sounds quite expensive, doesnt it?


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## ClubMan (3 Jan 2008)

What is the annual management fee? Any restrictions on term including early encashment charges? Yes it does sound expensive. You can get funds for no per contribution charge at all, no monthly policy fee and just an annual management fee of c. 1% (give or take). Obviously you need to look at the asset mix in any particular fund and other issues such as customer service, choice of funds available, ease of switching etc. but your _Acorn _product does sound relatively expensive these days.


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## bfield (3 Jan 2008)

No annual management fee. Just the 5% premium charge & €4.50 monthly fee as mentioned above. Also, no encashment fee if I redeem the full amount. Partial encashment includes a fee of €25 per encashment.

And yes I would agree, it is relatively expensive compared with other products. So this would seem to rule Option 2 out as a cost effective option. However the 1% annual management fee which you mention -  generally does this 1% apply to the full value of the fund - if so, this might prove just as costly if I put my 24k into various other funds...


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## ClubMan (3 Jan 2008)

bfield said:


> No annual management fee.


Are you absolutely sure about that. I find it difficult to believe that any unit linked fund would have no annual management fee.


> However the 1% annual management fee which you mention -  generally does this 1% apply to the full value of the fund - if so, this might prove just as costly if I put my 24k into various other funds...


Yes - annual management fees are calculated on the full value of the fund (albeit normally calculated/deducted daily and reflected in the unit price). As I said I would be very surprised if the _Acorn _fund(s) did not have an annual management fee.


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## bfield (3 Jan 2008)

ClubMan said:


> Are you absolutely sure about that. I find it difficult to believe that any unit linked fund would have no annual management fee.


 
Pretty sure about this, although If somebody else has information contrary about it, then I stand to be corrected. I've rang their office twice and spoke to 2 different people - both said there was no annual management fee, the only fees being the 5% on monthly preimum and the €4.50 monthly policy fee.

I also have a statement from them stating that their fees for selling, setting up & administering the policy for the 5yrs up to Oct'06 was a total of €2,082.79. Based on the assumption that most of their expenses are taken in the early years, then it does seem to confirm the "no annual management fee" status.

If this indeed is true, then Im looking at incurring an annual cost of €234 (12 x €19,50) for managing my fund. Of course this will increase as my premiums increase, but maybe it isnt so expensive after all...


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## LDFerguson (3 Jan 2008)

I don't deal with Acorn Life so I've no access to their technical details, but like Clubman I have major doubts that they are offering a fund with no annual management fee. 

Acorn Life's Managed and Managed Growth funds are managed by HSBC Asset Management. If there is no annual management fee, how are HSBC being paid?

Sometimes life assurance company staff get confused between charges that are levied at policy level and total charges. For example, your particular policy may not have an explicit annual charge for fund management, but this does not mean that the fund does not in itself contain an annual charge.


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## bfield (3 Jan 2008)

LDFerguson said:


> Acorn Life's Managed and Managed Growth funds are managed by HSBC Asset Management. If there is no annual management fee, how are HSBC being paid?


 
Actually these 2 funds are the very ones my money is being invested in. Time for a bit more investigation on my part.


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## ClubMan (3 Jan 2008)

The original documentation/terms & conditions should explicitly state what charges apply including the annual management fee.


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## bfield (3 Jan 2008)

Had a look at the original documentation and it just shows the following:
- A table illustrating the projected benefits & charges. The charges & expenses column begins at £934 for year 1 and runs through to year 20: £4,966. These are "to date" figures and are therefore accumulated over the years. 
- Also states that the premium shown includes all charges & expenses, including the cost of sales remuneration. 
- On a separate page it shows the total sales remuneration for each year & states that this includes all payments made to the sales associate, plus the cost of management and adminsistrative support, premises and other services provided to the sales associate by Acorn Life.

In the terms & conditions booklet, under section 2.6 Unit Prices:
- "A management charge equal to the daily equivalent of one half of one percent per annum of the policy unit value. We reserve the right to vary the amount of this charge in the future."

Never intended getting bogged down in the details of the Acorn Life charges but I suppose this is a crucial detail in deciding which investment option to choose.


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## ClubMan (3 Jan 2008)

So the annual management charge is 0.5%. This is in addition to the per contribution charge of 5% and policy fee of €4.50 but is calculated on the full value of the fund and reflected in the daily unit price. So the units are valued and then reduced by 0.5%/365 = 0.0137% to reflect this charge. Is there any bid/offer spread?


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## bfield (4 Jan 2008)

ClubMan said:


> So the annual management charge is 0.5%. This is in addition to the per contribution charge of 5% and policy fee of €4.50 but is calculated on the full value of the fund and reflected in the daily unit price. So the units are valued and then reduced by 0.5%/365 = 0.0137% to reflect this charge.


 
Thats what I figured after I read the T&C's but thanks for clarifying that for me Clubman. Seems like a sneaky way of including an annual management charge.



> Is there any bid/offer spread?


 
Yes. There is a bid/offer spread. Is this not typical for most unit linked funds?The bid & offer prices of the funds can be viewed here [broken link removed]
My money is being invested into Life Fund Series 2 (Managed Fund & Managed Growth Fund - 50% into each).


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## ClubMan (4 Jan 2008)

bfield said:


> Thats what I figured after I read the T&C's but thanks for clarifying that for me Clubman. Seems like a sneaky way of including an annual management charge.


I disagree. It seems clear enough to me once you posted the relevant extract.


> Yes. There is a bid/offer spread. Is this not typical for most unit linked funds?


Not necessarily. It used to be but there are many funds these days with no bid-offer spread. The spread is yet another effective charge. 

At least the annual management charge of 0.5% is competitive. The rest of the charges are not in my opinion (unless you can identify tangible benefits accruing from paying these that are not available for lower charges elsewhere). How the various charges affect valuations compared to another fund with no charges other than a c. 1% annual management charge would need some number crunching to figure out. As you mentioned above higher per contribution charges and a lower annual management fee could, in some cases, be less of a drag on performance than no per contribution charges and a higher annual management fee.


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## bfield (4 Jan 2008)

ClubMan said:


> I disagree. It seems clear enough to me once you posted the relevant extract.


 
maybe. But to tell me twice that there was absolutely no annual charge and no other fees other than the per contribution charge and policy fee, while all along they were reducing the unit value, is a bit sneaky in my opinion.



ClubMan said:


> At least the annual management charge of 0.5% is competitive. The rest of the charges are not in my opinion (unless you can identify tangible benefits accruing from paying these that are not available for lower charges elsewhere). How the various charges affect valuations compared to another fund with no charges other than a c. 1% annual management charge would need some number crunching to figure out. As you mentioned above higher per contribution charges and a lower annual management fee could, in some cases, be less of a drag on performance than no per contribution charges and a higher annual management fee.


 
ok, so to summarise with Acorn Life I pay 0.5% annual mgt charge, €234 on contribution & policy fees for '08 (which will probably be somewhere between 0.75-1% of fund value depending on performance!!) & a spread charge.

I think I'll be looking to spread the 24k into different funds (from the Financial Best Buys section) & use the additional €300 to top up my FA reg saver. Would this be a good plan for a 5-6yr period?

thanks again for the help.


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## ClubMan (4 Jan 2008)

bfield said:


> maybe. But to tell me twice that there was absolutely no annual charge and no other fees other than the per contribution charge and policy fee, while all along they were reducing the unit value, is a bit sneaky in my opinion.


That's different - that's the intermediary allegedly misleading you. I was referring to the printed terms & conditions which seem clear enough.


> ok, so to summarise with Acorn Life I pay 0.5% annual mgt charge, €234 on contribution & policy fees for '08 (which will probably be somewhere between 0.75-1% of fund value depending on performance!!) & a spread charge.


The charges seem high to me but you'd need to crunch some numbers to compare the impact to another fund with no charges other than a c. 1% annual management charge.


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