Probably the best (cheapest) PRSA in the world?

Fortune said:
I would expect to be able to get better pricing on an ARF, as PRSAs have to pay 0.05% of their value to the Pensions Authority each year
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There was a time when that was a certainty but something has changed in the past while with some providers. I'm not sure whether it's by design or error but I'd be leaning towards the latter. Good for the consumer and competition though.

There are anomalies in some of the Royal London & Standard Life product offerings. I'm not an actuary but the following wouldn't really 'add up' for me. Maybe the smaller players are leaner and have less operating unit costs? My own small buiness experience is that costs are on the up-and-up.

The base AMC (no distribution margin) for one SLAC PRSA (with a low ish minimum threshold?) is 0.40% and we know they have to pay 0.05% to Pensions Authority out of that. That base AMC is lower than what the provider offers on (say) an life assurance investment, to the best of my knowledge, with no PA fee to pay. I did pose the anomaly to the company once, but didn't get a reply.

The base AMC for Non-Standard PRSA and ARF with RL are the same @ 0.40% so I'm sure they'd prefer that you bought an ARF, post retirement , than a Vested PRSA as the ARF has more margin in it by the saving, to them, on the 0.05%. Plus, it's highly likely to be on a reducing balance basis.

The base AMC on a PRSA with the three biggest pension players is 0.50% and their other product offerings would typically have a lower base AMC.



Gerard

www.prsa.ie
 
So would the royal London prsa be cheaper for a public sector worker contributing about 6k per annum (open to either lump sum or monthly) vs the rest of the market, even execution only brokers via Zurich?
 
Tadhg22 said:
So would the royal London prsa be cheaper for a public sector worker contributing about 6k per annum (open to either lump sum or monthly) vs the rest of the market, even execution only brokers via Zurich?
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Possibly, but you'd need to compare the charges on each to be sure. The discretionary Royal London Ireland ValueShare bonus should also be factored on even if it's not guaranteed or the amount known in advance (0.13% so far for 2023 and 2024).
 
So currently paying 0.75% if minimum SP €5,000 or RP €350pm, and contributing about 6k per annum (could be done as a lump or monthly, doesn't matter). Seems that the RL would be cheaper?
 
What are "SP" and "RP"?
RLI definitely have AMCs less than 0.75%.
But Standard Life also have funds with an AMC of 0.4% (but no ValueShare bonus scheme).
 
ClubMan said:
What are "SP" and "RP"?
RLI definitely have AMCs less than 0.75%.
But Standard Life also have funds with an AMC of 0.4% (but no ValueShare bonus scheme).
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SP - single premium RP regular premium
SL AMC of 0.4% is only for 100k+ transfers I believe so not relevant for those just starting off or looking to build a small AVC
 
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Is it true Royal London work through broker only? Interesting that they are they still cheaper?
 
Tadhg22 said:
Is it true Royal London work through broker only?
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I think that that's the case alright.
Tadhg22 said:
Interesting that they are they still cheaper?
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Well, by only doing business through brokers they avoid the costs of maintaining their own broker/client service division and outsource the costs involved to the brokers even if they pay them commission for acquiring business and managing customers.
 
I think Standard Life's PRSA seems more competitive than many of the established life companies. However, it appears to have a number of disadvantages in comparison to Royal London Ireland. SL's AMC on Vanguard passive funds is actually 0.9%. The "rebate" may be subject to conditions such as external transfers in, single premium contributions and a balance of over €100k. I'm not familiar with the contract terms and whether the rebate is guaranteed over the policy term. Existing SL policy holders appear to be excluded from this level of rebate which, personally, I would find unacceptable. The incentives for brokers also seem to be changing in 12 days, which may have an impact on the availability of the rebate:
https://www.standardlife.ie/adviser...ews/enhanced-bonus-commission-on-synergy-prsa

It is very difficult to compete with RLI's AMC of effectively 0.32% simply because the company is owned by its policy holders rather than external investors. It's interesting how many commentators on AAM have stated over many years how it is impossible to offer internationally competitive AMCs on pension products here simply because the Irish market is too small in comparison with the UK, for example. Yet RLI seemed to have done it with a tiny slice (1.1% in 2023) of that market.

Until just a year or two ago, a 1% AMC was deemed good value from the major life companies. A 41 year old with a PRSA of €100k only growing at 10% nominal will pay €220,000 in charges at 1% AMC over 25 years. At 0.32%, the charges drop to €75,600. That difference in charges alone, which sounds unimportant, could fund a holiday apartment abroad for the retiree, nominally at least!
 
Poseidon said:
Existing SL policy holders appear to be excluded from this level of rebate
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I believe that's down to the rules regarding PRSAs. Every proving option has to be registered with the Pensions Authority as a separate product, so I would guess that it's not possible to change the pricing on an existing policy.
 
It's worth noting that Royal London have a wider choice of charging options on PRSAs than Standard Life and brokers can pick choices that suit their own business model. Choices that pay higher levels of commission will incur higher charges for the customer. So not all brokers will offer all versions of the Royal London PRSA products that feature the charges mentioned in this thread.
 
Poseidon said:
I think Standard Life's PRSA seems more competitive than many of the established life companies. However, it appears to have a number of disadvantages in comparison to Royal London Ireland. SL's AMC on Vanguard passive funds is actually 0.9%. The "rebate" may be subject to conditions such as external transfers in, single premium contributions and a balance of over €100k. I'm not familiar with the contract terms and whether the rebate is guaranteed over the policy term. Existing SL policy holders appear to be excluded from this level of rebate which, personally, I would find unacceptable. The incentives for brokers also seem to be changing in 12 days, which may have an impact on the availability of the rebate:
https://www.standardlife.ie/adviser...ews/enhanced-bonus-commission-on-synergy-prsa

It is very difficult to compete with RLI's AMC of effectively 0.32% simply because the company is owned by its policy holders rather than external investors. It's interesting how many commentators on AAM have stated over many years how it is impossible to offer internationally competitive AMCs on pension products here simply because the Irish market is too small in comparison with the UK, for example. Yet RLI seemed to have done it with a tiny slice (1.1% in 2023) of that market.

Until just a year or two ago, a 1% AMC was deemed good value from the major life companies. A 41 year old with a PRSA of €100k only growing at 10% nominal will pay €220,000 in charges at 1% AMC over 25 years. At 0.32%, the charges drop to €75,600. That difference in charges alone, which sounds unimportant, could fund a holiday apartment abroad for the retiree, nominally at least!
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Two thoughts occur to me from reading this….

I find it remarkable that an “Adviser” tab disclosing variable commissions is publicly visible on the provider’s website.
It’s good that the buying public has this visibility now but (many) years ago this would be confidential commercial information with all that entails for customer outcomes.

Some UK and Irish banks may shortly be collectively on the hook, for billions in refunds and compensation payments as a result of variable car loan interest rates….or in other words commission for the seller. Is there a corollary with that issue and variable commission rates on pension products?
 
AMCs can change with a few months notice. On Standard PRSAs they can't go above 1%, on Non-Standard PRSAs there's no such limit. Ask Davy's clients.

There were a few reductions in AMC pricing before RL came to market so the trend was downward. All companies have a base that thru won't go below.

But remember what the legislation stated at that time - unlimited contributions by employer to PRSAs - and I'd say, given the length of time it takes to approve a 'new' PRSA price, that it was anticipated that that rule wouldn't change and was priced into the new AMCs. There's a chance that some went too low and that will only come out in the years ahead, possibly via word of redundancies or increases in AMCs. There's also the chance that it'll be fine and they got the pricing spot on because the Country is flying there's enough business for everyone to make a profit.

If the PRSA providers that were in the market for all of 2024 don't announce that there was expotential growth in PRSA business last year then they were doing something wrong. If you're writing 50%+ more business and can control costs then you can afford to pass the saving on to the customer.
 
GSheehy said:
AMCs can change with a few months notice. On Standard PRSAs they can't go above 1%, on Non-Standard PRSAs there's no such limit. Ask Davy's clients.
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Does that really matter that much given that PRSAs are portable without penalty or restrictions? Your PRSA provider starts charging "too much", just move?
GSheehy said:
But remember what the legislation stated at that time - unlimited contributions by employer to PRSAs - and I'd say, given the length of time it takes to approve a 'new' PRSA price, that it was anticipated that that rule wouldn't change and was priced into the new AMCs.
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Do you mean that pricing strategy may have been influenced by the erstwhile "unlimited funding loophole" which has now been limited/closed off?
GSheehy said:
If the PRSA providers that were in the market for all of 2024 don't announce that there was expotential growth in PRSA business last year then they were doing something wrong. If you're writing 50%+ more business
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Again, you mean largely on foot of the "unlimited funding loophole"?
 
Fortune said:
I believe that's down to the rules regarding PRSAs. Every proving option has to be registered with the Pensions Authority as a separate product, so I would guess that it's not possible to change the pricing on an existing policy.
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That's the reason that the life companies like to give. In reality, all they have to do is to set up a new, lower cost policy B and then internally transfer from policy A to policy B. They typically won't do it for those existing customers who realize that they're being charged more than new customers. Presumably they know that most customers won't bother to leave them and probably don't even know their AMC.

The "price walking" new/existing customer pricing differential has been illegal in car and home insurance since 2022.
 
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