Article - the (depressing) reality of Irish investment options.

Those life company charges that are bandied about are very misleading. They’re the worst case scenario where some Dick Turpin character takes 5% commission upfront and the maximum trail commission to bring the Annual Management Charge up to around 1.75%.

I have a decent amount of money with a life company. I pay an AMC of 0.5% and that’s it. To get to a fully loaded number you’d need to add in trading costs and things like FX under the bonnet but life companies are doing them at institutional rates and on a massive scale. I’d be shocked if my 0.5% is much north of 0.65% ‘fully loaded’. It’s not the wild west.

Similarly, my Dad has his ARF with a life company at 0.75% which I’d reckon is 0.9%-ish with everything baked-in.

He also has an account with a wealth manager paying 0.85% for a 50-70 stock portfolio. There’s VAT on that, but the fully loaded actual costs come in at around 1.28% per year, which again is fair in my view.
 
Thanks @Gordon Gekko - so, as I suspected, the article is misleading with regard to its interpretation of the charges laid out in the KID documents.
 
Gordon Gekko said:
Those life company charges that are bandied about are very misleading. They’re the worst case scenario where some Dick Turpin character takes 5% commission upfront and the maximum trail commission to bring the Annual Management Charge up to around 1.75%.
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As the article also mentions, there is no problem at all to pay fees of whatever size for active management providing the return also justifies those fees. I don't think it's controversial to say that in most countries the best investment approach for an average investor over the long term will be simple passive ETFs with very low fees, maybe with some rebalancing from time to time. It is most unfortunate that the environment in Ireland makes this so difficult and it is not surprising that most will opt for active funds rather than attempt to navigate this themselves.
 
Gordon Gekko said:
Those life company charges that are bandied about are very misleading. They’re the worst case scenario where some Dick Turpin character takes 5% commission upfront and the maximum trail commission to bring the Annual Management Charge up to around 1.75%.

I have a decent amount of money with a life company. I pay an AMC of 0.5% and that’s it. To get to a fully loaded number you’d need to add in trading costs and things like FX under the bonnet but life companies are doing them at institutional rates and on a massive scale. I’d be shocked if my 0.5% is much north of 0.65% ‘fully loaded’. It’s not the wild west.

Similarly, my Dad has his ARF with a life company at 0.75% which I’d reckon is 0.9%-ish with everything baked-in.

He also has an account with a wealth manager paying 0.85% for a 50-70 stock portfolio. There’s VAT on that, but the fully loaded actual costs come in at around 1.28% per year, which again is fair in my view.
Click to expand...
what product are you getting these charges with?
 
Yet another misleading article on the misleading nature of KIDs from someone who doesn't understand what they're meant to represent. And, again, fails to inform folk about where (and how ) they could buy products that don't have the higher charges.

But hey, it wouldn't get any traction if they did that. You can buy an indexed global equity fund via a unit-linked investment with a TER of 0.66% but let's focus on the 3.5%+ figure. Another misleading thing that these articles do is 'compare' 1/2 asset class portfolios with multi asset funds that also have alternatives and property in them

There was an advocacy group started in 2020 but that seems to have fizzled out and there's no update on their Twitter account since 04/04/2021. They weren't really interested in the unit-linked market though. The best bit of advocacy one can do is to raise the issue of the exit tax regime with DoF or your local TD. But, not too many folk do that even though so many savers/investors are affected.

Exit Tax is a mess. KIDs are a mess. Savings/Investing environment is a mess.

Exit tax is 25% for corporations and 41% for individuals.

The 1% Government Levy is adding about 0.15% pa to your AMC.

In the tax year 2015 €247m was collected in exit tax (€300m in DIRT). In 2021 it was €129m (€20m in DIRT). There's €180bn currently on deposit via households. Exit tax was increased to 41% (from 36%) in 2014. It was 23% up to 2018.

At last budget it was mentioned that exit tax applying to savings/investments is (allegedly) being reviewed by a working group. But, the DoF heads looked at this a few years ago and the report they issued was terrible. It's probably a good time to write to someone in politics about exit tax.

Gerard

www.bond.ie
 
Gordon Gekko said:
Personal Retirement Bond
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But that's a retirement product which is a separate category. The article talks about charges and taxes in Ireland for investments in funds and etfs being excessive in relation to every other European country. If you want to invest outside of a pension every other country facilitate this with simple etfs and normal taxation except for Ireland. That's still holds true.

Another issue is inflation, indexation was removed around 2001, back then revenue at least allowed for reduced gains because of inflation and CGT was reduced accordingly. Now we are back in an era of high inflation but silence on any return to indexation
 
Gordon Gekko said:
Those life company charges that are bandied about are very misleading. They’re the worst case scenario where some Dick Turpin character takes 5% commission upfront and the maximum trail commission to bring the Annual Management Charge up to around 1.75%.

I have a decent amount of money with a life company. I pay an AMC of 0.5% and that’s it. To get to a fully loaded number you’d need to add in trading costs and things like FX under the bonnet but life companies are doing them at institutional rates and on a massive scale. I’d be shocked if my 0.5% is much north of 0.65% ‘fully loaded’. It’s not the wild west.

Similarly, my Dad has his ARF with a life company at 0.75% which I’d reckon is 0.9%-ish with everything baked-in.

He also has an account with a wealth manager paying 0.85% for a 50-70 stock portfolio. There’s VAT on that, but the fully loaded actual costs come in at around 1.28% per year, which again is fair in my view.
Click to expand...

The whole quote system is a mess and totally meaningless. Lots of contracts have early exit penalties in the first 5 years. These charges have to be shown in a quote/ KID. If you don't take your money out in the first 5 years, the charge doesn't affect you. Simples.

And as Gordon said, they have to show the highest possible charges. While there are some people on these contracts, most are not.

And yes, the investment world in Ireland isn't favourable to the investor. You can blame gross roll up for that. The Revenue should give the option of CGT & Income tax on distributing funds but they won't. But even if they did, people would still give out.

Re the life company charges, yes they are more expensive than DIY and platforms. But in exchange for the higher cost, they do ALL the admin for you including paying tax to the Revenue and arranging a refund of overpaid deemed disposal if it is due. Lots of people are happy to pay for that, even if it may cost them more in the long run. Different people have different needs.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
GSheehy said:
Yet another misleading article on the misleading nature of KIDs from someone who doesn't understand what they're meant to represent. And, again, fails to inform folk about where (and how ) they could buy products that don't have the higher charges.

But hey, it wouldn't get any traction if they did that. You can buy an indexed global equity fund via a unit-linked investment with a TER of 0.66% but let's focus on the 3.5%+ figure. Another misleading thing that these articles do is 'compare' 1/2 asset class portfolios with multi asset funds that also have alternatives and property in them

There was an advocacy group started in 2020 but that seems to have fizzled out and there's no update on their Twitter account since 04/04/2021. They weren't really interested in the unit-linked market though. The best bit of advocacy one can do is to raise the issue of the exit tax regime with DoF or your local TD. But, not too many folk do that even though so many savers/investors are affected.

Exit Tax is a mess. KIDs are a mess. Savings/Investing environment is a mess.

Exit tax is 25% for corporations and 41% for individuals.

The 1% Government Levy is adding about 0.15% pa to your AMC.

In the tax year 2015 €247m was collected in exit tax (€300m in DIRT). In 2021 it was €129m (€20m in DIRT). There's €180bn currently on deposit via households. Exit tax was increased to 41% (from 36%) in 2014. It was 23% up to 2018.

At last budget it was mentioned that exit tax applying to savings/investments is (allegedly) being reviewed by a working group. But, the DoF heads looked at this a few years ago and the report they issued was terrible. It's probably a good time to write to someone in politics about exit tax.

Gerard

www.bond.ie
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where can one get an etf with a TER of .66% I'm not disagreeing. I just want to know where to get started.

also what is the usual TER of a avc prsa with zurich prisma 5. can't find the info anywhere. that's a big issue imo. People are signing up to products without clear information.
 
T McGibney said:
They want to make life harder for investors. They absolutely hate the very idea of unearned income.
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I especially dislike the name "unearned income".
If I worked, saved, made sacrifices, then its well earned.
There are a group of people in Revenue who hate the idea of wealth, its creation, maintenance, or inheritance.
If you have attained it these ways, then they have somehow failed in their job.
 
@Dublin85

The indexed global equity fund via a unit-linked investment with a TER of 0.66% is on the (my) bond dot ie website

The equivalent TER ( AMC + Other Ongoing Costs - OOCs) is on the Zurich Life Range Of Funds Guide but you're better off asking questions about Pensions/PRSAs in the Pension and Retirememt Planning forum because there are (some) differences between the OOCs on PRSA Funds & Investment Funds. Just trying to keep this thread on topic.

Gerard

www.bond.ie
 
fistophobia said:
I especially dislike the name "unearned income".
If I worked, saved, made sacrifices, then its well earned.
There are a group of people in Revenue who hate the idea of wealth, its creation, maintenance, or inheritance.
If you have attained it these ways, then they have somehow failed in their job.
Click to expand...
Yes we really need to define ‘unearned income’ more accurately. Some examples come to mind that might be included. Family A saves up to buy a home. €30,000 deposit and a 35 year mortgage. Family B get an identical home next door. This is through social housing. Johnny works for 30 years and pays his prsi continuously. Mary works for 5. Both get the same amount of assistance when they become unemployed. Again unearned income?
 
My biggest issue with the charges has always been that the companies make it impossible to work out what you have actually been charged. There is a lot of legally we have to say it could be X, but it is really less, trust us. Even given that, they sadly are the best option to most people who aren't going to DIY it, our household even has money through one of the brokers here on this thread.
 
GSheehy said:
@Dublin85

The indexed global equity fund via a unit-linked investment with a TER of 0.66% is on the (my) bond dot ie website

The equivalent TER ( AMC + Other Ongoing Costs - OOCs) is on the Zurich Life Range Of Funds Guide but you're better off asking questions about Pensions/PRSAs in the Pension and Retirememt Planning forum because there are (some) differences between the OOCs on PRSA Funds & Investment Funds. Just trying to keep this thread on topic.

Gerard

www.bond.ie
Click to expand...

Just looking at the bond.ie website which seems simple with just 2 choices (a good thing).

But trying to work out what's the advantage of going with bond.ie versus just ringing up Zurich and asking for the Investment Bond I see on their website.
 
joe sod said:
The ETF taxation and deemed disposal every 8 years is the worst aspect of the Irish investment scene relative to any other European country.
I think the US domiciled etfs are more or less taxed under CGT but these are not open to buy anymore and you also have to prove to revenue that they are taxed under CGT since revenue have no clear rules on this themselves
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It's not impossible to buy U.S. domiciled ETF, there are a number of brokers in the U.S. that allow EU residents to open a brokerage account and buy U.S. domiciled ETF but it's not worth it anymore: I did some research a few weeks ago and starting from January 2022 most U.S. domiciled ETFs are treated the same as the Irish domiciled ETFs (or EU regulated structures) and so again are subject to exit tax at a rate of 41 per cent on both income (dividends) and gains. The rule seems to be that if a particular U.S. domiciled ETF has a equivalent UCITS ETF then that U.S. domiciled ETF is treated the same as the UCITS ETF for tax purposes. The most popular U.S. domiciled ETFs all have an equivalent UCITS ETF.
 
ryaner said:
My biggest issue with the charges has always been that the companies make it impossible to work out what you have actually been charged. There is a lot of legally we have to say it could be X, but it is really less, trust us. Even given that, they sadly are the best option to most people who aren't going to DIY it, our household even has money through one of the brokers here on this thread.
Click to expand...
I haven't experienced that.
Maybe you can clarify with a more specific example?
 
silverfox239 said:
Just looking at the bond.ie website which seems simple with just 2 choices (a good thing).

But trying to work out what's the advantage of going with bond.ie versus just ringing up Zurich and asking for the Investment Bond I see on their website.
Click to expand...
Sometimes going to the underwriters directly means higher charges. Strange, but that's sometimes how it works.
 
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