Woeful Fund Performance

[LDFerguson]

Can I ask would it cost this OP anything to switch their fund to another pension provider? Do pension funds sill have entry and exit charges on transfers?

If it's an AVC rather than an AVC PRSA, then as @GSheehy says, there's a requirement at the moment for a Certificate of Benefits Comparison to transfer to an AVC PRSA. This costs around €1,200 + VAT.

On an AVC there's no restrictions on charges, exit penalties etc. So there might also be a charge on the fund for transferring out. You'd only find out by asking. (An AVC PRSA has regulations around what can be charged and you cannot be charged for transferring out.)

A possible workaround would be to start a new AVC PRSA for future contributions but leave the existing fund where it is. I'd ask IPF to confirm what the ongoing charge on the fund would be in that scenario. If it's 0.75% per year and nothing else then it would be okay.

 

[CharlieMac]

Seems clear in most cases public sector workers should be making AVCs in to a PRSA AVC. But as I've discovered there are certain retirement options only available to them if their money is in an AVC. I wonder are there charges to transfer a PRSA AVC in to an AVC? Still no exit charge if transferring from that to an AVC?

 

[LDFerguson]

I wonder are there charges to transfer a PRSA AVC in to an AVC? Still no exit charge if transferring from that to an AVC?

You can't be charged for leaving an AVC PRSA but you'd need to check if the recipient AVC is going to charge you for accepting the money.

 

[Sunnygirl69]

As Protocol suggested this is IPF response....
They seem to be telling me only 95% of my contribution each month is allocated?

'Oh sorry I was looking in the wrong place on my system - my apoliges for the mini heart attack!
Yes your policy is active and ill email you over a statement for your records now

In regards to charges/ allocation, the only AVC plans to have then set up through your payroll is through IPF (0.75% annual charge + 95% allocation)
Or to move to Corn Market who are the other providers of the group AVC scheme. I'm unaware of what their charges are so I'm afraid I can't confirm them.

The alternative we looked at a few years ago was a PRSA AVC which can get up to 98% allocation, but it has a higher annual charge usually.

The policies that offer 100% allocation and have a lower annual fee are generally self managed meaning you either manage the policy yourself, or you would pay a broker directly if you needed advice for its management / at your retirement claim stage'

 

[ClubMan]

Does this make sense to anyone?

Yes. The allocation rate for contributions is 97% when paid in. So the allocation charge is 3%. That charge is only applied to incoming contributions.

I would be careful when looking for higher allocation rate policies because it typically means the annual management charge is more expensive (ie 100% allocation but 1%+ annual charge)
These policies end up costing more in the long run'

This is not necessarily true. 100% allocation rates and sub 1% AMCs are not difficult to find these days.

The charges mentioned earlier are awful.

OK so they replied to me today.
My allocation rate is 97%
Fund management charge pa is 0.75%
Monthly policy fee is €3.81

 

[Sunnygirl69]

Apologies IPF sent me response meant for another customer

 

[Sunnygirl69]

As Protocol & some others suggested, I asked IPF for higher allocation. This is their response. Seems like even worse deal for me....

'Oh sorry I was looking in the wrong place on my system - my apoliges for the mini heart attack!
Yes your policy is active and ill email you over a statement for your records now

In regards to charges/ allocation, the only AVC plans to have then set up through your payroll is through IPF (0.75% annual charge + 95% allocation)
Or to move to Corn Market who are the other providers of the group AVC scheme. I'm unaware of what their charges are so I'm afraid I can't confirm them.

The alternative we looked at a few years ago was a PRSA AVC which can get up to 98% allocation, but it has a higher annual charge usually.

The policies that offer 100% allocation and have a lower annual fee are generally self managed meaning you either manage the policy yourself, or you would pay a broker directly if you needed advice for its management / at your retirement claim stage'

 

[ClubMan]

Is that the verbatim response from them? If so it's shockingly badly composed.

As several people have said you probably need to see what, if any, charges or certificate of benefit comparison apply if you choose to transfer this policy out to somewhere with better charges.

And maybe park this one now and set up a better value (PRSA?) AVC elsewhere for future contributions.

Seems to be that all relevant advice that can be given in this context has been posted already. It's up to you to consider it and act as you see fit.

 

[Fortune]

the only AVC plans to have then set up through your payroll

Is this really a deal-breaker for people? A direct debit and uploading a PRSA document to my account on revenue.ie is too much?

 

[misemoi]

I would say it is lack of knowledge of differences in fees/allocation rates etc - most people probably just look at the tax relief they are getting, which is the same no matter the fund. So on the face of it, it is easier to let payroll take care of it and not bother with a tax return. The fact that people are making AVCs at all is a good thing! But like mortgages, the more you know, the better a deal you can get for yourself.

 

[Mayo1969]

FWIW I have the same policy with New Ireland as yourself (with the same targeted retirement dates) and my gain (for approximately the same investment as yourself) is €4k gain of premiums contributed over value (or about 8% return). Even though I've held the AVC for over 15 years, I've contributed most of that sum within the past 3-4 years so the 8% is based on a growing sum from a relatively small base investment.

Incidentally not only are NI hard to contact but their website is also pretty scanty about the information available (my next premium contribution date is showing as >2 years ago!). This thread has provided food for though though regarding IPF and their fees so it's something I might have to look into further

 

[Sunnygirl69]

@Mayo1969 is IPF (Irish pensions & finance) your broker? Or how do u arrange it?

 

[Mayo1969]

@Mayo1969 is IPF (Irish pensions & finance) your broker? Or how do u arrange it?

Yep, same

 

[Sunnygirl69]

@Mayo1969 can't get my head round that

 

[Tuscany]

I often read on AAM that it’s quite easy to get 100% allocation for AVCs and the suggestion that anyone who is not is somehow being ripped off especially if there is only a 95% allocation rate. 97% allocation, it seems, isn’t too bad.

That’s ok for people who have the knowledge and confidence to manage their own investment.

I think that people and especially public servants, who have gone with the usual public sector brokers, would be prepared to pay for some level of advice as I doubt if many feel in any way sufficiently expert in the area.

The other side of this is that if everybody is supposed to be able to get by with 100% allocation, the question, then is if there is any role for brokers in regard to AVCs.

Surely the % not allocated should relate to the service provided by the broker and the advice needed by the client. Does it make sense to pay the same rate each year? You could expect a higher charge in the first year for set up and financial review etc and also in the years closer to retirement but the middle years might not require the same level of service by the broker or the same cost. So, a lower allocation might be justified in early and last years.

I suspect that some people with AVCs factor in that they are getting, maybe 40% relief, and are happy to pay something for advice be it 3% or 5% not allocated. It is not just the Cornmarkets of this world who have less than a 100% allocation.

I would be one of those people who would likely expect to pay for some element of professional advice as I probably reckon I would need it but would be at a loss, from the discussions on AAM, to know how much that should be!

 

[ClubMan]

I often read on AAM that it’s quite easy to get 100% allocation for AVCs and the suggestion that anyone who is not is somehow being ripped

Where did anybody claim that someone facing a 95% allocation rate is being ripped off? I know that I've always said that they're probably paying over the odds unnecessarily but never that they're being ripped off assuming that the (high) charges are clearly stated.

off especially if there is only a 95% allocation rate. 97% allocation, it seems, isn’t too bad.

Anything less than 100% is poor value for money. If you need advice pay for that separately but have 100% of contributions invested.

That’s ok for people who have the knowledge and confidence to manage their own investment.

I don't manage mine myself. I simply invest in passive index trackers (e.g. MCSI All World Equity index trackers). I claim no special knowledge about equity investing. I'm usually skeptical of those who do.

The other side of this is that if everybody is supposed to be able to get by with 100% allocation, the question, then is if there is any role for brokers in regard to AVCs.

Why should AVCs require higher charges? Even if there is some reason that they should then pay for the service separately, not as a cut of each contribution or a higher than necessary AMC.