ARF Charges

Are there any providers here that offer reasonable charges (<=> SIPP type charges in the UK) for ARFs? I have heard numbers of 1%/1.5% which seems ludicrously high especially for a low risk retirement income producing portfolio.

ARF charges are essentially split three ways.

1. ARF provider for the ARF structure, documentation, administration, paying out income, deducting and remitting tax, PRSI, USC., on the income as appropriate.
2. Fund manager(s) for managing the funds.
3. Financial broker for advice on retirement options, sorting out the retirement claim paperwork, advice on provider, product and fund choices in the context of your overall financial situation and ongoing advice on making sure that the ARF and funds you chose in your 60s is still suitable for you as you turn 80 etc.

All three are variable amounts. Some ARF providers charge more than others. Some funds have higher annual charges than others. Some financial brokers charge more than others. You can also negotiate with your financial broker that if you don't need any advice and are willing to choose your own product and funds, you can set up an ARF on an execution-only basis and the financial broker charges should reflect the reduction in their work.

If you're looking for self-directed / self-administered functionality, e.g. set up a trading account with a stockbroker to choose your own shares or ETFs within an ARF structure, and/or to buy a property with your ARF, that is possible but it can often work out dearer than choosing simple, off-the-shelf funds like Vanguard or BlackRock index-tracking funds. With self-directed, you pay for the ARF structure, you pay for the financial broker and you'll pay the stockbroker, before you invest in a thing.

The amount of the fund also is a factor. AMCs of <1% are certainly available for off-the-shelf fund choices.

Regards,

Liam
www.FergA.com

JamesBM said:

Are there any providers here that offer reasonable charges (<=> SIPP type charges in the UK) for ARFs? I have heard numbers of 1%/1.5% which seems ludicrously high especially for a low risk retirement income producing portfolio.

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The wholesale cost for Qualified Fund Manager (QFM) who will operate payroll etc plus a dealing an execution account that will allow a U.K. SiPP level of functionality is 0.40%pa

Marc said:

The wholesale cost for Qualified Fund Manager (QFM) who will operate payroll etc plus a dealing an execution account that will allow a U.K. SiPP level of functionality is 0.40%pa

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That's a competitive charge for one out of three of the components of ARF charging if a client wants UK SIPP level of functionality. How much extra for the funds and the sales/advice commission, the other two component parts?

JamesBM said:

Are there any providers here that offer reasonable charges (<=> SIPP type charges in the UK) for ARFs? I have heard numbers of 1%/1.5% which seems ludicrously high especially for a low risk retirement income producing portfolio.

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Is that suggested 1%, of Fund value i.e a fund value of 500k would be charged 5k per annum by the fund and that 5k would then be divided out between fund, broker etc?

Or maybe that doesnt make full sense. A fund thats a while away from retiring wouldnt attract broker charges I assume?

So that 1% would be just for the New Irelands of this world? And that charge is for managing my fund and buying/selling positions as needed?

I must enquire as to the charges on my DC occupational pension fund and report back here.

Is it the case that these a headline figure and you need to delve deeper to get the detail or is it transparent and clear and upfront?!

Less than 1% should be the target in my opinion.

ClubMan said:

Less than 1% should be the target in my opinion.

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Is that on the assumption that you

Can guarantee that you won’t live longer than average
And will never lose mental capacity
Don’t get hit with sequence of return risk
Don’t have a spouse who has their income cut off while your ARF goes through probate on your death
Can access passive funds at institutional rates
Are able to maintain your own AML verification documents in perpetuity
Can assess your own suitability and appropriateness in the light of frequently changing regulations
never need to compare your ARF with the annuity forgone in order to assess mortality drag over the whole of your retirement
Oh, and live in a country where the pension legislation never changes so you won’t need professional assistance ever


I recently ran a MIFID II fee disclosure on a huge ARF (multiple millions) since 2016 to today including our fee, the product fee and investment management fees. The Effect of charges over this period was a reduction in return of 1.28%pa.

That is exceptionally good value for a monthly income, with daily monitoring and auto rebalancing.

ClubMan said:

Less than 1% should be the target in my opinion.

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Could you please advise of a company that would provide all in charges of 1%?
I find it very confusing transparency wise.

Perseus said:

Could you please advise of a company that would provide all in charges of 1%?
I find it very confusing transparency wise.

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So do i.

And it feels like 1%+ is expensive and money being made for doing very little at expense of the funds value/investors return. I mean a 500k pension fund isnt beyond reality and at 1% thats 5k! Each year! And i would wonder for what, really.

But in general huge lack of transparency and clarity and, importantly, up front pricing.

People should know exactly how much, in monetary terms they are paying and to whom for administering their pension fund.

I suspect most havent a notion.

I would, politely and respectfully, challenge the financial planners etc on this forum to try and outline the lay of the land and maybe allay some concerns in this respect.

Broadly speaking, are fees on ARFs higher/lower/similar to fees on AVCs?

www.prsa.ie is an execution-only broker that will sell you an ARF at 0.75% AMC or less.

• The Annual Management Charge for a Retirement Bond or ARF is 0.75%. NB: Lower AMCs available for substantial (circa €200k+) single contribution transfers.

Protocol said:

Broadly speaking, are fees on ARFs higher/lower/similar to fees on AVCs?

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But arent these 2 completely different things?

My understanding is that an avc is simply contributions made to pension fund.

Arf is the actual fund.

So im not sure I understand your question and it shows to me the lack of understanding out there of pensions etc.

Thanks Protocol- is this the sum of all PRSA charges (0.75%), you'd think so only to find there are charges that aren't quoted, that's what a friend of mine told me recently but found that hard to believe as would be very anti consumer rights and surely wouldnt be allowed?

Marc said:

Is that on the assumption that you

Can guarantee that you won’t live longer than average
And will never lose mental capacity
Don’t get hit with sequence of return risk
Don’t have a spouse who has their income cut off while your ARF goes through probate on your death
Can access passive funds at institutional rates
Are able to maintain your own AML verification documents in perpetuity
Can assess your own suitability and appropriateness in the light of frequently changing regulations
never need to compare your ARF with the annuity forgone in order to assess mortality drag over the whole of your retirement
Oh, and live in a country where the pension legislation never changes so you won’t need professional assistance ever


I recently ran a MIFID II fee disclosure on a huge ARF (multiple millions) since 2016 to today including our fee, the product fee and investment management fees. The Effect of charges over this period was a reduction in return of 1.28%pa.

That is exceptionally good value for a monthly income, with daily monitoring and auto rebalancing.

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I don't really know what you're getting at but you seem to be sowing unnecessary FUD. If somebody wants to invest their own money in a pension, PRSA, ARF, or other pension or non-pension product then they really shouldn't pay more that 1% in annual management fees if it's an execution only arrangement. Especially if it's invested in a passive index tracker or similar. In fact they should really aim for less than 1%. If they want to pay more than that to somebody who claims to be able to predict the markets/future or have the inside story on some secret sauce then that's their prerogative.

ArthurMcB said:

My understanding is that an avc is simply contributions made to pension fund.

Arf is the actual fund.

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Both are simply investments.

ArthurMcB said:

But arent these 2 completely different things?

My understanding is that an avc is simply contributions made to pension fund.

Arf is the actual fund.

So im not sure I understand your question and it shows to me the lack of understanding out there of pensions etc.

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I think I see your point,

An AVC is a pre-retirement pension fund, where the saver is accumulating contributions.

Whereas an ARF is a post-retirement policy, where there are no added monthly contributions, and instead there are monthly withdrawals.

Perseus said:

Thanks Protocol- is this the sum of all PRSA charges (0.75%), you'd think so only to find there are charges that aren't quoted, that's what a friend of mine told me recently but found that hard to believe as would be very anti consumer rights and surely wouldnt be allowed?

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This discussion is about ARF fees, not PRSA fees.

I have a Zurich ARF with an AMC of 0.5%.

It is invested in International Equity.
There is an extra annual charge of 0.04% for this fund.

My understanding is that the total annual fee is 0.54%

The extra annual fees for different funds are set out in the attached file.


"If you have an investment policy with a product management charge of 1.00%, the following are the total ongoing costs that apply for a selection of funds:
• Cash = 1.00% • Balanced = 1.04% • World Equity (Dimensional) = 1.35%
*Other Ongoing Costs are calculated annually. The Other Ongoing Costs figures are based on our latest available data, and will vary over time."

@Protocol You mentioned a website called wwwww.prsa.ie ( frustrating thst i camnot use quotes as my limit reached?) I am talking only about ARFs.

Thanks Sclass will have a look at what you've helpfully referenced.

ClubMan said:

I don't really know what you're getting at but you seem to be sowing unnecessary FUD. If somebody wants to invest their own money in a pension, PRSA, ARF, or other pension or non-pension product then they really shouldn't pay more that 1% in annual management fees if it's an execution only arrangement. Especially if it's invested in a passive index tracker or similar. In fact they should really aim for less than 1%. If they want to pay more than that to somebody who claims to be able to predict the markets/future or have the inside story on some secret sauce then that's their prerogative.

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The presumption in a court of law is that the accused is innocent.

The presumption in a hospital is that the patient is there to be cured.

The presumption on this site, in my opinion is that the default should be to avoid professional advice and to DIY at the lowest possible cost.

Rarely do I see replies which are balanced on this matter and if you weigh every post on here my belief is that there is a bias against paid
advice in favour of execution only.

Yet many, if not most of the questions display a level of financial literacy consistent with the need for professional advice.

I would suggest that the site exists because financial literacy is not taught in schools and colleges and is generally much lower, especially amongst the cohort of people currently eligible to purchase an ARF.

Yet little or no attempt is made to assess, as would be required of a professional, the investor’s knowledge or experience, with even the most novice and inexperienced often being pointed to an execution only service as the default answer from many posters.

Yes, some investors may wish to avoid costs but these same investors are recklessly irresponsible if they encourage others to do so without taking the necessary care to assess their need, willingness and ability to do so.

In this thread I have listed some of the predictable risks associated with pursuing an ARF that may require professional assistance during a period of life characterised by potentially declining mental capacity to make informed financial decisions.

What are professionals to say to the spouse or civil partner of a, deceased, dyed in the wool DIY ARF investor who meticulously avoids paying for advice their whole life?

Sorry, you’re on your own with this problem?

Professional fees are not; or at least should not, be paid by investors to try to beat the market, I agree completely.

But professional fees which are paid as a contingency or a liability risk premium should not be conflated with active management fees.

I expect, as is also traditional, to be attacked for holding my belief that professional advice pays for itself.

If you want to hear me discussing ARFs I cover some of the issues here https://youtu.be/1IZapGHDDf0



And address the low levels of trust in financial services here https://youtu.be/fv0uKTG3V6c