Discount/execution-only pension options

plantrepair

Registered User
Messages
9
The AMC is made up of three parts:

1. Costs of running a life insurance company - staff wages, light & heat etc
2. Broker commission/ allocation rates - we see this with options where there is an allocation rate of 105%, the base amc is 1%. Where the allocation rate is 100%, the base amc may be 0.4% or 0.5%.
3. Profit


Steven
www.bluewaterfp.ie
Apologies for jumping into this thread. I've been wondering if the AMC is the full charge and I'm guessing not.
I'm looking at a KIDD document at the moment on a recommended fund where they mention a number of charges including a once off entry fee of 0.93%, ongoing annual portfolio costs(or impact on return as its described) are 1.83% plus transaction costs of .09%
The annual charge I was quoted was 1%.
So is my annual charge the 1% AMC or this 1% plus the 1.83% +.09%.
To me impact on return and charge/fee are the same
Thanks
 

Zenith63

Frequent Poster
Messages
458
Apologies for jumping into this thread. I've been wondering if the AMC is the full charge and I'm guessing not.
I'm looking at a KIDD document at the moment on a recommended fund where they mention a number of charges including a once off entry fee of 0.93%, ongoing annual portfolio costs(or impact on return as its described) are 1.83% plus transaction costs of .09%
The annual charge I was quoted was 1%.
So is my annual charge the 1% AMC or this 1% plus the 1.83% +.09%.
To me impact on return and charge/fee are the same
Thanks
Not sure what provider/KIDD you're looking at, but for my Zurich pension they mentioned at setup time to "please note Zurich offers additional 'external funds' managed by outside fund managers which accrue an additional management charge". So in your example I'd imagine the 1.83%+0.09% is charged within the fund, then an additional 1% is charged by your pension provider.
 

Zenith63

Frequent Poster
Messages
458
Wonder if somebody can help explain this for me? I came across it while looking through old emails when setting up the pension I discussed in this thread (a Zurich EPP) -
"The annual fund management charge applicable is 0.75% as follows - 0.4% is deducted in the price declared, therefore the declared unit price is the bid price after this 0.4% deduction. The additional 0.35% is deducted by way of cancellation of units. Please note there is no bid/offer spread."

I can see that the 0.35% cancellation of units will in-effect take 0.35% out of my pension pot each year, makes sense. The 0.4% deducted from the price declared though, this sounds like it would only impact you when you buy/sell rather than being a further 0.4% hit on your pot each year, or what am I missing?

Thanks!
 

Conan

Frequent Poster
Messages
1,056
The 0.4% is deducted from unit price each month before declaring. So the unit price is net of the ongoing 0.4% each year.
The 0.35% charge is deducted by actually encasing units, ie reducing the number of units.
Overall the net effect is a charge of 0.75% pa.
 

LDFerguson

Frequent Poster
Messages
4,120
The 0.4% deducted from the price declared though, this sounds like it would only impact you when you buy/sell rather than being a further 0.4% hit on your pot each year, or what am I missing?
Simplified example - let's say the assets within the fund grow by 4% in value in a given year. The unit price of the fund will go up by 3.6% per year. So it doesn't only hit you when you sell.

The reason for this system is that Zurich Life have plenty of different charging structures available for different products. For individual customers, their standard annual charges range from 0.5%, through your 0.75% to over 1% for some. This allows them to use the same fund for all contracts, regardless of charging on the contract. So on yours they take 0.4% out of the fund and 0.35% out of your specific policy. If you were in a contract with a 1% overall annual charge, they would get their 0.4% from the fund and an additional 0.6% from the individual policy.

Hope that makes sense.

Regards,

Liam
www.ferga.com
 
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