Pensions fees

Julez

Hey,

I'm thinking of setting up a pension, I unfortunately know very little on the topic! Was wondering if somebody could tell me how the fees on this policy sound?

Pension Fees

The Reduced Allocation Period seems high, is that normal

Any input appreciated.

Hani Kosti

What policy are you setting up? The fees are very genetic so would be helpful to know. Their fees seem very high tbh

Julez

It's a personal pension plan with a managed growth fund.

bmwguy

That's a generic table of fees for all their products. Get the one related just to the pension you are considering.

The best thing for you to do is get a statement of projection based on putting a certain amount in every month for a certain time frame based on a certain assumed return rate.
Talk to a few competitors too and do the same thing. The ones with higher overall charges will have lower projections. Make sure it's all like for like.

Geuze

Those fees are very high, and complex.

Walk away.

Investigate a low cost PRSA pension from a discount broker.

You should be able to get a PRSA with no bid offer spread, no policy fee, 100% allocation.

skippy2

are you a higher rate taxpayer ?...................

Julez

Yes, I'm on roughly 40k a year. Contractor.

IK09

Hi Julez,

Just for full disclosure, I am an Independent QFA, but I do not know your circumstances so please do not take this as Financial Advice. I do not know your personal circumstances so couldnt possibly give you advice.

There are a number of considerations to take into account when taking out a pension, and which pension to take out. I am assuming that you are Self-Employed and have not setup a company. I am assuming this because you are looking at a Personal Pension (PPP).

Single Premium/Regular Premium:

Another consideration is whether you are going to be making on going monthly contributions (Regular Premium), or are you going to be making a lump sum contribution (Single Premium) at the end of your fiscal year. The reason this is so important is because of allocation rates. When you are making a lump sum contribution, it is generally accepted that you get 100% allocation. Meaning if you put €5,000 into the pension, €5,000 goes into the pension....rather than for example 98% allocation where €4,900 would go in and 2% would be commission being taken by the Advisor.

With ongoing monthly contributions, the fee schedule is much easier to hide.

The main differences between a PPP and a PRSA are as follows;

All fees within a PRSA are governed by legislation, which keeps the annual management charges down and allocation rates high.
Fees within a PPP are not governed by legislation.

With a standard PRSA, if you are making monthly contributions, the charge can't be more than 5% of each contribution (giving you an allocation of 95%) and 1% per annum of the fund value as an Annual Management Charge.

If you are making a Single Premium payment into a PRSA, you must get 100% allocation.

If the fund you are planning on investing your pension in is available to both PRSA's and PPP, you really need to drill down into the charging structure of them both, because from my experience, the PPP turns out more expensive, and why would you pay higher charges to be invested in the same fund under a different product name...

One piece of advice I will give you is to sit down with an Independent Financial Adviser, someone who is not a "Tied Agent" to a particular company. They can advise you on not just the different charging structures of different products, but on the different charging structure of different products....with different life companies. They SHOULD also go through every aspect of your financial life and analyse your needs.

I hope this helps. The financial services industry is a wash with "Financial Language", if your Adviser is not explaining everything to you in plain English, that everyone can understand, please ask him/her to do so.

Hani Kosti

IK09 wrote:

One piece of advice I will give you is to sit down with an Independent Financial Adviser, someone who is not a "Tied Agent" to a particular company. They can advise you on not just the different charging structures of different products, but on the different charging structure of different products....with different life companies. They SHOULD also go through every aspect of your financial life and analyse your needs.

Not only they should...how else would you recommend a suitable product? Age, current financial situation/commitments, family plans etc all play a significant part of overall financial planning
Very good insight BTW, good to see there are FA who care!!!

IK09

Hani Kosti wrote: »

Not only they should...how else would you recommend a suitable product? Age, current financial situation/commitments, family plans etc all play a significant part of overall financial planning
Very good insight BTW, good to see there are FA who care!!!

Hi Hani Kosti,

Believe it or not there are people in the financial services industry who really care about people! However, there is a growing divide in this industry, any Qualified Adviser should be completing a full financial review with every client and analysing the clients needs, however you would be surprised by the number of "Sales People" who are being categorised in the Advisory Field.

The issue that arises, in my opinion is twofold, one is of need vs. affordability, the other is about Advice and Decision. Too many "Advisers" take the simple option here....someone wants to put €100 per month into a pension...so that is the business they carry out, rather than looking at how that €100 p/m will serve the client in their retirement goals.

When I speak to someone about their retirement, I like to see what the client expects from their retirement...what size of fund they would like to have built up....why have they chosen that figure as a goal...etc.

Then show them the current retirement regime and how long their fund would last with a chosen draw-down level etc.

What I often find with clients who have pensions is that firstly, this has never been done with them, so they dont know how much money they will need in retirement as income, nor do they know how much of a fund they will need to support that level of draw-down, neither are they aware of what level of contribution the will need to make on a monthly or annual basis to accumulate the desired fund. This is the need.

The affordability is simply how much can be contributed to the fund in order to satisfy the clients retirement goals to the best of their ability.

The issue of advice vs. decision is just that...the advice that I give to a client, in theory should not differ from Adviser to Adviser. The decision that the client makes is entirely up to themselves and how they feel about the advice given. In my experience, the advice given to a client is often unaffordable, so compromises need to be made. The advice is the advice, that is what the client is paying for. The decision is their own.

Julez, if you need any help with deciphering the language of the financial products dont hesitate to ask.

IK09