J
You should not pay more than a 1% fund management charge.Here's some pertinent questions: -
- What are the charges? (Hint - at €100,000 she should be expecting at least 101% allocation and an annual management charge no higher than 1.5% with no bid/offer spread.)
- What does the fund invest in? Equities? Property? Bonds? Cash? Look at the proposed ARF investment in the context of all her other investments, with a view to keeping her diversified, i.e. if she already has most of her other investments tied up in equity investments, it might be wise to look at other asset classes for diversification unless she really wants equity investment.
- Does she require a guarantee? If so, exactly what are the terms of the guarantee offered - do they only apply on a fixed date?
- If her pension adviser is recommending a particular ARF, how does it compare with the alternatives?
- How much is the pension adviser getting paid out of your Mum's fund?
The allocation should be min 100% with no spread.
At your mum's age, a significant fixed interest/cash % would be appropriate.
You would pay tax on any amount over which your total pension fund exceeds the revenue maximum.
If your DB Pension is already 2/3 of final salary, you can still increase this pension (perhaps) by using your AVC to provide a 100% spouse pension (if there is not a 100% spouse pension) or indexation in line with CPI (if not already there) or even a 10 year guarantee period.
No prob Nermel - does your DB pension have a ten year guarantee and increase in line with CPI and provide a 100% spouse pension?
The only way to get > 100% with no spread for an ARF holder at that age and fund size would be if there was a crazy fund management charge like 1.5% as you mentioned or an early exit penalty or probably both!!
Not so. Assuming that the broker is not taking maximum commission, you can get >101% allocation from several providers, 1% annual management charge and no early encashment penalties on regular income. There would be encashment penalties in the first five years for full or partial surrenders but that shouldn´t be an issue for someone taking out an ARF for the long term.
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