Standard PRSAs with low charges.

S

stuffit

Registered User
Messages
36
I've read the thread: The cheapest PRSA?


However most of the product information is out of date.

Myadviser.ie no longer sells PRSAs with 0% commission.

Labrokers.ie offer of a 0% commissions, 1% management fee (reducing to 0.85 %) expired on 15th September 2003



Can someone tell me what is the position as at May 2005.

Are there any Standard PRSA with no entry charges and low (i.e less than the 1% max) management fees to be had ??

Ste
 
Anything useful here?
  • [broken link removed]
  • LABrokers.ie (only fairly conservative funds available though as far as I know)
  • [broken link removed]
 
If you think the provider can deliver a growth rate of at least 4.5% and if you have a lot of time until retirment (28 years in my case) then the critical factor is the annual funds managament charge. The greater the investment return delivered by the provider to the fund value the more important a low mgmt charge is compared to a low deductions on payments.

For example a 98% allocation rate on contributions with a 0.75% funds mgmt charge is significantly more attractive than a 100% allocation with a 0.9% allocation. I did the maths. So, the question (I think) boils down to what provider can deliver the best growth rates with the lowest mgmt charge (and without a massive deduction on payments).

QQQ
 
ClubMan, the 4.5% figure is just a (low) growth figure that I used when calculating the fund value in the future. Using that low figure the fund value, with a 0.75% funds managament charge and a 98% allocation rate and a 3% p.a. increase in payments made, was better than a 100% allocation rate with a 0.9% p.a. funds managament charge and a 3% increase in p.a. payments. The absolute amount of the payments in are irrelevant so long as you are comparing like with like. If the growth rate achieved is greater than 4.5% p.a. then the case for the lower funds managament charge is even greater. The time period I used in all cases was 28 years and I also assumed (for simplicity) that payments were made yearly rather than monthly.

I worked this out by taking the future value of a gradient series over 28 years, discounted by the commission taken on each years payment (100% - allocation rate%) and the yearly funds management charge.

So who offers the lowest fund management charge without taking a huge hit on the allocation rates on payments made into the scheme and do they offer any bonuses?

Tx
QQQ
 
OK - so the 4.5% is simply the assumed annual growth rate going forward. But why 4.5%?
 
4.5% was illustrated because it is roughly the lowest growth rate for which the 0.9% mgmt charge and 98% allocation rate [call thise CASE 1] is better than the 0.75% and 100% [CASE 2] (see above other assumptions).

In 2003 ...
Fund value [CASE 1] is slightly greater than fund value [CASE 2]

whereas if you use growth rate of 9% (optimistic) you get
Fund value = €4,400,644 [CASE 1]
Fund value = €4,378,207 [CASE 2]
 
Sorry, I made a mistake above. The first sentence should have read: "4.5% was illustrated because it is roughly the lowest growth rate for which the 0.75% mgmt charge and 98% allocation rate [call thise CASE 1] is better than the 0.75% and 100% [CASE 2] (see above other assumptions). "

By the way, whilst the numbers are important and serve to illustrate my belief that low funds managament charge is the critical element when making a decision (given that you will never know for certain what the real growth rate will be), the question is who has the lowest funds management charges? I'll make a few calls tomorrow and revert back unless someone else knows right now.

Thanks
 
You must log in or register to reply here.
Back
Top