Fees for pension company director

[trackdaychamp]

Hi All, my wife has a pension with about €200,000 in various funds with one of the main insurance providers. She has 103% allocation with 1% fees per annum via our broker. This might be a silly or basic question but would she be better off with 100% allocation if we could have gotten 0.75% as I believe that is the lowest fee possible from reading other pension posts on here.

We are happy to have execution only and don't want/need investment advice. I have an SSAP with >500k in there and make my own fund choices (low cost 100% equity index fund) so we are confident enough in making fund choices.

Thanks in advance

 

[Marc]

0.40% is the lowest cost executive pension

 

[LDFerguson]

Allocation rates only affect her on each new contribution she makes. The annual charge affect her every year. So to answer your question as to whether 103% allocation rate / 1% annual charge is better or worse than 100% allocation rate / 0.75% annual charge depends on the size of her contribution, how many more contributions she will be making before retirement and the number of years until retirement. As a very general rule, lower annual charges are better the longer you have until retirement. She can get lower than 0.75% annual charge; e.g. 0.35% for a Global Equity Tracker fund for a fund value of the size you mention.

Regards,

Liam
www.ferga.com

 

[trackdaychamp]

Thanks Liam & Marc. So the % fee becomes more important the longer the years and the allocation affects only that years contribution? Broker has us locked in for 5 or 6 years for the payments 2017, 2018, 2019 but we moved her into something more flexible when we spotted the lock in, just before the 2020 contribution. Appreciate your direct answer on fees. I want to get her into SSAP like me but we'll leave her funds for now till around 2025 to avoid €6-7k early break penalty and move into SSAP or find someone to offer the 0.35% you've mentioned for Global Equity Tracker. Thank you again

 

[SGWidow]

Hi Liam,

0.35% for a global equity tracker seems like a good deal.

Are there additional charges?

What I'd really like to know, in simple terms, is if a global tracker fund was tracking a particular global index and had no tracking error, what would be the difference between the index return and and the fund return. [I'm hoping/presuming that the differential is the total cost.] Also, how is the intermediary rewarded for placing/managing the funds?

Thanks!