Can I complain about high AVC charges?

Hi there.

I took out an AVC a few years ago but at that stage, because the contribution was peanuts, the fees associated with it were not a major concern.

Going forward to know I see there is a 3% fee on each contribution and a 2.25% annual management fee, which falls to 1% after 10 years.

I spoke to an advisor and I can change to a provider with just a 1% annual fee.

I'm really annoyed by this, annoyed with myself as much as anything and the fees were explained when I joined up.

Does that then mean I can't make a complaint? The fees are out of kilter with industry norms.

The one thing to note is that this crowd usually sends emails to the organisations mailing list whenever a payrise is coming (I work public sector) to promote using the payrise towards AVCs.

However the maths are wrong as they project a value based on your contribution and an annual return rate which does not allow for the impact of these fees. On that basis can I complain?

If I complain, who can I complain too?

I am thinking of others here who actually might rely on the AVCs more than me so I think they need to be called out.

Thank you.

I'm not sure what your actual complaint is?

Most goods and services have an effective minimum attainable price. Few goods and services have an effective maximum price. Often the gap between highest and lowest price is occupied by maybe 15% by quality and 85% by marketing. Look at handbags: €10 in Penneys Vs €10,000 for Hermes. This principle applies to pension products as much as anything else.

Always shop around. For quality and not just price, but you need to be able to distinguish to some extent between mere branding and actual quality.

In most circumstances, buying from the person just because they've successfully inserted themselves into your field of vision isn't an ideal strategy.

There is a big and in my opinion highly problematic issue in the public sector where one of the leading AVC product providers to public sector employees is a significant financial sponsor of at least some prominent public sector trade unions, to the point that several unions allow its branding to be closely identified with their own brands.

Unsurprisingly this provider enjoys a roaring trade from sales to individual public sector employees on products that are often spectacularly poor value relative to the market.

The cost of all this is ultimately borne by uncurious employees.

You probably don't have a good basis for your complaint.
But you are free to make a complaint if you choose.

You would firstly make your complaint directly to the provider under their IDR (internal disputes resolution) procedure.

If you are not satisfied with their answer you can make a complaint to the FSPO.

BrokeGuy said:

I took out an AVC a few years ago but at that stage, because the contribution was peanuts, the fees associated with it were not a major concern.

Going forward to know I see there is a 3% fee on each contribution and a 2.25% annual management fee, which falls to 1% after 10 years.

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Why are you only realising this now?

It's an AVC (as opposed to a PRSA AVC) so there is no 'see through' disclosure requirement on it. Do you know if there are conditions applying to the 10 year reduction eg. having to keep paying into it for the 10 years, or some other condition like any increases over the years have to run the 10 years too?

You can't transfer it to a lower cost PRSA AVC unless you pay circa €1,000 for a Certificate of Benefits Comparison. Did the advisor offer you to transfer the current value ito another AVC at a lower cost?

Is the new one you're being offered from the same advisor/brokerage and is it also an AVC, or is it a PRSA AVC?

Honestly think you'd be at nothing here on the complaint. It wasn't mis sold and fees were explained to you. It's just, at the time, you didn't realize the impact.

@GSheehy

I transferred my AVC (probably the same provider as the OP) to a PRSA-AVC a couple of years ago. There was no charge on either side of the transaction, and I was only two years into the original AVC. Entirely separate provider.

I moved for a better range of funds rather than AMC. The only advantage at the time of my original provider was salary deduction & tax relief at source, neither of which balanced the lower potential returns.

Sorry, should have said if transfer value is more than €10,000 then CoBC required.

I'm in the same situation - have an old AVC that is a bit over the €10000 mark in value and want to transfer it to a lower cost PRSA AVC but can't do that without paying €1000 for a CoBC. Hoping that the requirement for a Certificate of Benefits Comparison will be abolished in the near future.

@GSheehy

@Jiminy112233

There may have been a CoBC for mine. But the value was about €17k and there were no charges either side- the balance on the old online account just went to zero and a few days later the balance on the new online account went up by the same amount.

Maybe my T&Cs were different to those of the OP. But definitely no charges. (My new PRSA-AVC is execution only, not sure if that was a factor).

Where's the requirement for a CoBC set out? And/or the €1k charge? Seems like it'd be in breach of competition law to require an effective 10% exit fee on a €10k AVC to move to a different provider.

EDIT- it looks from Google like it's a requirement for moving from a DB rather than from an AVC?

An AVC is an Occupational Pension. A PRSA AVC isn't. So you're moving from DC to PRSA and the rules are as above.

The company that had the AVC is the same company that did the PRSA AVC? So it was an internal transfer? If so, should not have been done without a CoBC.

Nothing go to do with competition law. All got to do with Revenue Pension Rules.

Gerard

www.execution-only.ie

I was in a similar situation to OP. Took out the AVC with the 'in house' provider a long time ago when I started to think putting in to an extra bit of pension would be a good thing. Not very financially savy at the time but thought it a good thing. I then noticed that it hardly grew at all, the only extra money in it was the tax refund, which at least was good news, but any growth seemed to dissappear with fees. I did complain about the poor performance and asked to have the fees explained to me but got nowhere. I stopped putting into it then and figured I'd be ok pension wise and I'd pay more off mortgage instead.

I agree with T McGibney at #3 above. It's an unhealthy relationship between unions and financial service providers; the less financially aware of us are sitting ducks really when we think we are actually doing the right thing!

Stitcher said:

I then noticed that it hardly grew at all

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Whatever about high charges, maybe inappropriate asset allocation was also a factor here?

I think I chose a middle range risk, fund. Even so !

I used to complain a lot about the fees charged by Cornmarket brokers.

But I want to be fair to them.


Other than the 595 euro set-up fee, their charges seem okay-ish?


0% contribution charge / 100% allocation
1.00% AMC, which isn't the lowest, but I have seen worse
After 40k fund value, the AMC falls to 0.75% on the amount above 40k

BrokeGuy said:

the fees were explained when I joined up.

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I don't think you'd get very far with a complaint for this reason. While it may be frustrating that you have subsequently found brokers who charge less, it's not really grounds for complaint against the original one.

BrokeGuy said:

However the maths are wrong as they project a value based on your contribution and an annual return rate which does not allow for the impact of these fees. On that basis can I complain?

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Are you sure about this? If you get a Statement of Reasonable Projection (SORP) it should take account of charges. If this broker is issuing SORPS that take no account of charges then yes you could complain. I'd be surprised if one of the big public sector brokers was making a rookie error like this, but if you have written proof, then you could indeed complain about this aspect.

Couldn't agree more with @T McGibney with post #3 above.

Protocol said:

Other than the 595 euro set-up fee, their charges seem okay-ish?

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This specific product is deserving of its own thread from a transparency point of view.

"What do we want?"

"Transparency and clarity or course."

"When do we want it?"

"Now!! But this product gets a pass."


It's been posted a good bit lately and it's raising more questions than ILAC or Cornmarket appear to be willing to answers. Fair enough if it does what it says on the tin (we just have this sheet to go on as there is no other supporting documentation available to back it up) but it's odd how it's just surfacing now with all the negative comments over the years for this provider/advisor combo.

It may well be that it's 100% accurate and the deal is as stated but we've had two different posters linking to remuneration disclosures that state, in one, that a trail of 0,40% is paid and, in another, that it's 0.42%.

Would I sell something where I can't see through the pricing? No, not in this day and age. If you can't explain it to a client you've no business selling it. Have actuaries, in the past, created products/pricing with convoluted structures to maximize profit for their employers and they only they understood at the time? Yes, but they've rode off into the sunset with their DB pensions.

It's hard to reconcile why the Pensions Authority insist on the disclosure/compliance regime for one product that they regulate and just ignore all that on AVC pension schemes, which they also have responsibility for.