The nuts & bolts of execution-only ARFs

L

Loose Change

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A few months from now, when I reach age 60, I'll be converting my pension pot into an ARF. Thanks to all the generous members of this forum, I've been able to educate myself on the complicated pensions landscape. I'm hoping you can clear up some of the finer points of 'execution-only' for me...

My pension pot (after removal of the 25% lump sum) will be circa €250k. After careful consideration, I've decided to go the execution-only route, with 92% of the pot in one of the passive global equities index funds, and the other 8% in cash (which will be used to service my mandatory 4% draw-down & hedge against market slumps).

I know that alarm bells will be ringing for some of you, re my strategy above, but let me allay your fears by pointing out that both my wife & I also have a defined-benefit public-sector pension, and a sizeable pot of savings (which will be held in low-risk places). Anyhow, the purpose of this post is not to ask you to critique my strategy.

Can anyone help me understand how I go about finding & engaging with an execution-only broker, and what I can expect that to involve, in the setup phase? How long does it usually take put everything in place? What's the typical range of up-front setup fees, that I can expect to be charged? Does the broker liaise with my pension company, to get the pot released, or do I have to do that?

Re ongoing activity, after initial setup, am I correct to assume that the broker will not initiate any action, and the ones I'm likely to have to initiate will typically be limited to:
- Moving monies from the equities fund to the cash account, from time to time.
- Instructions about when I want to receive draw-down payments, or take extra payments.
- Instructions about pausing monthly payments (probably a rare occurrence).

Re the above ongoing activities, I assume there will be a fee to the broker each time I ask for one of them. Is there a fee to the provider also in this case? Typically how much might these 'action' fees be?

I understand that there will be an AMC from the provider, and it's normal for the broker to get a cut of this, so I shouldn't need to make any yearly payment to the broker. Is this right?

Obviously I will need to keep an eye on the fund performance (using the provider's website) but is there any other ongoing activity I will need to engage in?

Re the portion of my pot that's held in cash, is there always an AMC associated with this? Or does that vary depending on what kind of cash 'vehicle' it is held in?

Sorry, I realise I'm asking a lot here. Any advice greatly appreciated.
 
Loose Change said:
Does the broker liaise with my pension company, to get the pot released, or do I have to do that?
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I think that may vary between one broker and another so it's a question to ask one from the outset.

Loose Change said:
Re ongoing activity, after initial setup, am I correct to assume that the broker will not initiate any action
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Yes.

Loose Change said:
- Moving monies from the equities fund to the cash account, from time to time.
- Instructions about when I want to receive draw-down payments, or take extra payments.
- Instructions about pausing monthly payments (probably a rare occurrence).
Click to expand...

You can give these instructions directly to the ARF provider. They will deal with any such instruction. They will give you information about your ARF on request. The only thing they won't do is to give you advice on the advisability of a particular course of action. They'll just do what you tell them to do.

Loose Change said:
Re the above ongoing activities, I assume there will be a fee to the broker each time I ask for one of them. Is there a fee to the provider also in this case? Typically how much might these 'action' fees be?
Click to expand...

Most of them would be covered by the annual charge the provider is receiving.

Loose Change said:
I understand that there will be an AMC from the provider, and it's normal for the broker to get a cut of this, so I shouldn't need to make any yearly payment to the broker. Is this right?
Click to expand...

Correct. You wouldn't be paying the broker an ongoing fee for an execution-only transaction.

Loose Change said:
Re the portion of my pot that's held in cash, is there always an AMC associated with this? Or does that vary depending on what kind of cash 'vehicle' it is held in?
Click to expand...

All ARF providers charge an AMC on all assets under management regardless of what type of asset it is. So yes, there's always an AMC, even for cash.

Regards,

Liam
www.FergA.com

Disclosure - we offer execution-only services. There are a couple of other execution-only brokers who also post here on Askaboutmoney.
 
Knuttell said:
What are the sum of all charges incl AMC for execution only ? @LDFerguson.
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In fairness to the brokers who help out here, from previous discussions,
The sum of all charges would be down to many variables.

AMC charged by provider (usually insurance company QFM).
Funds chosen (other ongoing cost).
Early exit charge or not.
Size of ARF.
Broker trailing charge or not.
Intermediary commission.

Basically we need to know exactly what we want and then shop for a price.
I think they usually offer with and without early exit.
Early exit charge, lower AMC but reduces your incentive to shop around later. For a few years anyway.
 
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Loose Change said:
Can anyone help me understand how I go about finding & engaging with an execution-only broker, and what I can expect that to involve, in the setup phase?
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Check out the brokers website.

You can then request that they send you an ARF application pack.

They will probably email you the pack.

You print out the forms and scan the completed forms back to the broker.
 
Loose Change said:
Re the above ongoing activities, I assume there will be a fee to the broker each time I ask for one of them. Is there a fee to the provider also in this case? Typically how much might these 'action' fees be?
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Zurich don't charge any fees for suspending and restarting drawdowns during any particular year, provided the overall yearly drawdown matches the originally agreed drawdown (e.g. 4%). If drawdowns were suspended early in the year and restarted later on that year, the later drawdowns would be larger than the early drawdowns.

If you take an extra lump sum drawdown (e.g. to fully utilize your 20% tax band), Zurich will charge a 20 euro fee for this drawdown.
 
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