Hi everyone. Here’s the update post as promised.
1. Cornmarket’s Fees, Remuneration and Transaction Costs
The question of whether Cornmarket’s public sector AVC may have “hidden” costs has now been explored extensively in this thread.
I’ve received an update from Cornmarket on the renewal commission point (posted below). I think it would be helpful to consolidate the information we’ve gathered on fees / remuneration into a single post:
- Cornmarket’s document setting out the fees for the public sector AVC schemes with the tiered AMC reduction can be found here. It states that:
- There is a 0% charge on regular contributions. I have verified this by comparing the amount of money that goes out from my Payslips with the amount of money that ends up in my AVC pot from Pension Planet Interactive (Irish Life’s online pension Interface). So there are no hidden “entry fees”.
- There is a 4% charge on ‘single” contributions to your AVC. So contributions you make to an AVC other than through your payslip will incur this cost.
- That the AMC of the funds you can invest in with your AVC will vary. We have established in the thread that you will have to email Cornmarket to find out (i) what specific funds are available for you to invest in under the particular public sector AVC scheme your employer has signed up to and (ii) what the AMCs are of those funds (because this information is not currently made available on Cornmarket’s website).
- That a “tiered” AMC applies which reduces the AMC by 0.25% on any amount in the AVC between €40,000 and €140,000 and by a further 0.25% on any amount greater than €140,000.
- Cornmarket has clarified in correspondence that this operates as a “rebate” once the fund value is over €40,000 and works as follows:
- The first €40,000 of the member's value does not have any reduction in AMC.
- The AMC for each fund code reduces by 0.25% on the member's value that's between €40000 - €140,000 (the value of the specific fund code doesn't have to be over €40000 but all fund codes combined. In other words, the rebate applies to the overall AVC pot rather than to the amount you have in specific funds).
- The AMC for each fund code reduces by a further 0.25% on the value that's over €140000.
- That a €595 consultancy fee will apply if you take advice from Cornmarket. Cornmarket’s website clarifies that if you decide to set up an AVC on an execution only basis you must pay a €100 fee.
- That Cornmarket is paid initial and renewal commission “out of the opposite referenced charges” on the fee sheet for the ongoing administration and marketing of your AVC Scheme.
To get into Cornmarket’s remuneration / commission in more detail:
- Provision 4.58A of the Central Bank of Ireland’s Consumer Protection Code requires all intermediaries to make available a summary of the details of all arrangements for any fee, commission, other reward or remuneration provided to the intermediary which it has agreed with its product providers.
- Cornmarket’s remuneration document explains information regarding their remuneration in detail.
- The remuneration document states that Commission is: “the payment (made by the product provider) that is earned by Cornmarket for work undertaken on behalf of both the provider and the consumer. The amount of commission is generally directly related to the quantity or value of the products sold.”
- As regards the public sector AVCs with Irish Life, the remuneration document clarifies that:
- Cornmarket may receive a 2.25% or 3.25% of a single premium payment as commission, depending on the particular scheme.
- Cornmarket receives 0.42% of the value of the fundas renewal commission.
- When queried further about this, and whether the renewal commission is in addition to the AMC, Cornmarket has clarified that “The 0.42% renewal commission noted is what Irish Life pays to Cornmarket, the AMC would remain the same and that commission is not included in any client fees.”
- Cornmarket’s fee sheet backs this up and states expressly that commission it receives does not amount to “additional charges”.
- More generally, The CBI Code requires that a regulated entity must ensure that in all its dealings with customers and within the context of its authorisation it:
- ... acts honestly, fairly and professionally in the best interests of its customers and the integrity of the market;
- ... acts with due skill, care and diligence in the best interests of its customers;
- .... does not recklessly, negligently or deliberately mislead a customer as to the real or perceived advantages or disadvantages of any product or service
- ... makes full disclosure of all relevant material information, including all charges, in a way that seeks to inform the customer;
As regards other ongoing costs on the Irish Life funds:
- There is no reason to believe these are any different from the other ongoings costs for same funds if they were invested in outside a pension – and which are disclosed in the KIDS document Irish life makes publicly available. Some of these are explored in Post 26.
So I think we have now gathered enough evidence to say that the AVC product with the tiered AMC “Does what it says on the tin” as far as fees, remuneration, charges etc… are concerned. I think it would be a stretch to suggest otherwise.
2. Going with Cornmarket vs. Other Providers
I want to be absolutely clear that:
- I think the default strategies / funds Cornmarket advices its customers to invest in (cautious, balanced, adventurous) are awful value.
- That Cornmarket’s customer service is diabolical. It has taken me more than a month to clear up basic queries by email in some cases.
- That it is reprehensible that Cornmarket does not inform prospective customers of the fact there may be very low fee options on some of the Irish Life index funds via the execution only option (depending on the scheme in question).
Notwithstanding the above, Cornmarket may still be far and away the best option for an AVC if the member can take advantage of the tiered AMC rates in combination with a low AMC on index funds
If a public servant wasn’t able to avail of the tiered AMC rate to its fullest potential or if index funds with sub 0.8% AMCs weren’t available on a tiered scheme, then AVCs with a discount provider would certainly be worth exploring.
I’ve tweaked the wording slightly in the main OP to reflect this.
3. Queries on Pension Limits / Why this thread exists
@CharlieMac You’ve asked some detailed questions that I’m afraid I wouldn’t be in a position to offer any comment on. Somebody that actually works in pensions and posts on this forum like Liam Ferguson, Gerard Sheehy, Steven Barrett, Marc Westlake (if you’re super rich!) etc…. would have to explore.
I put this thread together because I wanted to provide public servants on the Single Scheme with info on their pension benefits, to understand the scope to grow their wealth through AVCs, to provide some general tips re: investment options and to provide some general insight on AVC limits within DB schemes.
The thread’s essentially a consolidation of everything I wish had been explained to me as a Single Scheme Member a number of years ago. Old posts from users like
@Conan have been particularly helpful in building that knowledge over the years. At my stage of life I’m a lot less concerned about how I spend my pension / what happens if I hypothetically reached the AVC limits and more concerned about accumulating wealth. The thread’s contents and the limits of my own knowledge / experience reflect that.
Pensions are notoriously complicated and it may really make sense to pay for advice or post a money makeover to get more considered options for your particular circumstances.
4. “Paying Hospital Bills”/ buying additional scheme benefits with an AVC via the Purchase / Transfer facility
I’ve made a small tweak to the OP to reflect this is possible – per the Post
here. I might post a bit more about the purchase / transfer facility in the future.