Are these fair fees for new executive pension?

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Marian2017

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Hi. I'd be grateful if anyone experienced with pensions could look over these figures and give me their opinion. I'm self-employed and a broker recommended by my accountant is steering me towards an Irish Life MAPS Complete Solutions pension. I'd be starting with a lump sum of €20,000 and €500 per month thereafter.

Net allocation of regular premium 100%, 98% on the single premium.
Fund management charge on regular premium of 1.40% including 0.25% trail commission to broker.
Fund management charge on the single premium of 0.75%.
Monthly fee of €4.63.

So I'd be paying 2% of the €20,000 to set up the pension. I thought Irish Life might have been paying the broker's fee for that but maybe not? Is the AMC of 1.4% higher than average?

Any thoughts appreciated as I'm just starting to look into this. Thanks.
 
Hi Marian,

Looks pretty saucy to me....

Presumably, what's happening here is that you are not paying the broker a fee and his income is coming from commission. Is this correct?

What I'd be interested in knowing is whether the broker has disclosed the commission payments to you and whether he is obliged to disclose these payments?
 
Thanks for the reply. Yes, the broker didn't offer the option to pay a fee instead. There was no mention of his commission payments. I thought I might have read somewhere that brokers aren't obliged to do so with executive pensions. I don't think €400 is particularly high if that's the only fee the broker is getting for setting up the pension but I was wondering if it was the norm to pay it or if Irish Life paid it by giving the broker a commission.
 
Hi Marian,

It will be interesting to see what the professional advisors say but I would very, very strongly suspect that €400 is his commission on the single premium and that there will be additional (and probably significantly more) commission payable on the regular premium (i.e. the broker will be getting both initial and on-going commission on the regular contributions also).

I wasn't aware that there was some sort of exemption on commission disclosure on executive pension plans - again, it would be nice for the experts to confirm. Whether it legally exists or not, it's not great practice.

Just one other point, are these all "company" pension contributions and are they in respect of the current tax year? Is the lump sum likely to be replicated in future years? (Depending on your answer there may be a techie tax point to be aware of).
 
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Yes, the company is paying the premium and the lump sum is likely to be replicated other years. I hadn't thought to ask whether additional once off premiums would fall into the 98% single premium allocation or the 100% regular contribution one. I suspect I know the answer.
 
Marian2017 said:
Hi. I'd be grateful if anyone experienced with pensions could look over these figures and give me their opinion. I'm self-employed and a broker recommended by my accountant is steering me towards an Irish Life MAPS Complete Solutions pension. I'd be starting with a lump sum of €20,000 and €500 per month thereafter.

Net allocation of regular premium 100%, 98% on the single premium.
Fund management charge on regular premium of 1.40% including 0.25% trail commission to broker.
Fund management charge on the single premium of 0.75%.
Monthly fee of €4.63.

So I'd be paying 2% of the €20,000 to set up the pension. I thought Irish Life might have been paying the broker's fee for that but maybe not? Is the AMC of 1.4% higher than average?

Any thoughts appreciated as I'm just starting to look into this. Thanks.
Click to expand...

The base AMC is pretty high at 1.15% when there are pension plans out there that have a base charge of 0.5%.

I don't use Irish Life's products as they are expensive and inflexible but I looked them up. It appears the commission is 7.5% every second year for a total of 4 payments. If another advisor uses Irish Life more, they may correct me.

The commission on the single premium is 3%, with Irish Life paying 1%. That isn't a competitively priced structure either. There are other companies will give an allocation rate of 103% for a management fee of 0.75%. You can get 101.5% allocation for 0.5%. You can get an allocation of 105% for an amc of 1% (see how the amc goes up when the allocation goes up? Who's paying for that extra allocation?). And yes, ongoing single premiums will get 98% allocation.

Marian is correct about disclosure. If you compare the disclosure document between an executive and personal pension, there is a lot more detail in the personal quote. The Central Bank came to the conclusion that if you are capable of running your own business, you are capable of seeing through the smoke and mirrors that is pension charging structures. It's a nonsense.

It is best practice though to disclose all fees up front so everyone knows where they stand.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Many thanks, Steven. Those are exactly the kind of details I was looking for. If I could just ask one more thing, please? Which companies could you suggest would give me a better allocation rate and lower AMC? Thanks again.
 
Marian2017 said:
Many thanks, Steven. Those are exactly the kind of details I was looking for. If I could just ask one more thing, please? Which companies could you suggest would give me a better allocation rate and lower AMC? Thanks again.
Click to expand...

Remember Marian, in most cases, the higher the allocation, the higher the AMC.

But most other insurance companies offer a lower cost contract. I don't think Irish Life do though. I can't make a specific recommendation without understanding your goals, circumstances etc.

As Dan said, you could also do it on a fee basis and have it charged to your company and keep your pension money for yourself.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
I think insurance companies/brokers take advantage when self employed/company directors are putting money into pension funds as a means to reduce their tax bills.
It's like the detail of the pension is lost among the rush to get the supposed massive tax relief.


Just for reference, I have part of my deferred fund in a Ir Life Maps fund with 0.80 amc. No contribution charge obviously.
It's still high though and I assume there is about another 0.5 % that I don't see in explicit charges for the underlying funds.
Need to do something about it soon !!
 
JoeRoberts said:
I think insurance companies/brokers take advantage when self employed/company directors are putting money into pension funds as a means to reduce their tax bills.
It's like the detail of the pension is lost among the rush to get the supposed massive tax relief.


Just for reference, I have part of my deferred fund in a Ir Life Maps fund with 0.80 amc. No contribution charge obviously.
It's still high though and I assume there is about another 0.5 % that I don't see in explicit charges for the underlying funds.
Need to do something about it soon !!
Click to expand...

Joe, it's like toy shops advertising for Christmas. Pre Celtic Tiger, I used to do 1/3 of my years business in the 2 weeks before the November deadline. That has largely died away as incomes suffered, people went limited and I started my own business and had to build up a new client base.

But I wholly agree that some brokers take advantage. They are the same brokers that take advantage every other day of the year. The ones that feel they shouldn't disclose any more information on charges than they have to or bury it in the ton of paper that has to be issued to clients.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
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