Buiy out bond start-up fee

M

Madra

Registered User
Messages
94
I moved jobs a few years ago and left my old Employer Occupational pension in situ. I have since been informed that the pension is being closed down as the company has been taken over and I have been given a few options as to what I can do with my contributions over the years. I’m toying with the idea of a buy out bond but could move it to my current employer also. Having looked at the T&C of the bond which I can keep with the current pension provider I saw that there was a once off fee of 5% to move to a bond and small management fees (< .8%) thereafter. The once-off fee seems very high at 5%. Is this a normal percentage? Does anyone know of a lower buy-in rate for a bond with another institution? AFAIK there is no charge to move the pension to my current employer.
 
Irish Life's Buy Out Bond product offers an entry charge of <1% with ongoing annual management charges of 0.65% for index-tracking funds or 0.75% for actively-managed ones.

Liam D. Ferguson
www.ferga.com
 
That sounds reasonable but the booklet they sent to me stated 5% once off set-up or entry fee. I will try and contact them so.
Thanks
 
I wonder is the 5% fee mentioned a bid/offer spread? If so, it may be reduced to some degree by an enhanced allocation. For example, if there's a 5% bid/offer spread but your allocation rate is 105.5% or higher, that's effectively no charge. (105.5 - 5% = 100.225%).

All our Irish Life Buy Out Bonds have an allocation rate of 106% - sometimes higher for large amounts.
 
Thanks LD - You hit the nail right on the head. The allocation rate is between 105% and 106% so I think the fee I refer to is the spread or bid. So I guess its the old swings and roundabouts. Just as a matter of interest is there a reason for stating the figures in this way ? Why not just allocate 100% and say free set up charges ?
 
Just as a matter of interest is there a reason for stating the figures in this way ? Why not just allocate 100% and say free set up charges ?
Click to expand...

I'm not sure there's an inarguable reason as some companies have dispensed with the concept of bid/offer spreads altogether and express the charges in the simpler way you suggest.

If I was being cynical, I'd say it was a throw-back to the days before commission disclosure when life & pension companies deliberately dreamed up of absurdly complex charging structures and jargon to make it difficult for consumers to understand what the charges really were.
 
You must log in or register to reply here.
Back
Top