Pension Question

Tree Scape

Hi All
I'm looking for some advice about pensions. I took out 1 out about 7 years ago with Ark Life. To date it has just about managed to break even. I put €158 into it, and it is now worth 11K, but as I say the preforamnce is cack. At start of year I opende another with Quinn and its about +30% to date. What are the implications of closing the ark life one and transferring the €158 to the new quinn one.....or would it be better to stay and chance that Ark Life will begin to deliver better return ?

CCOVICH

Tree Scape wrote:

I took out 1 out about 7 years ago with Ark Life. To date it has just about managed to break even. I put €158 into it, and it is now worth 11K, but as I say the preforamnce is cack.

I presume you mean €158 per month? What kind of charges are you paying? Charges tend to eat up a lot of your return in the earlier years. Either way, a pension term would tend to be 30+ years, so looking at how it is doing after year 7 isn't really an indiaction of how it will look in 20 years time.

Pension fund manger returns were published in last Friday's Irish Times. The 5 year return for AIB (Ark Life) was -1.3% and the 10 year return was 8.5%. The relevant averages were 0.5% and 9.8%.

Tree Scape wrote:

At start of year I opende another with Quinn and its about +30% to date. What are the implications of closing the ark life one and transferring the €158 to the new quinn one.....or would it be better to stay and chance that Ark Life will begin to deliver better return ?

Past performance is no guide to the future etc. QL probably have the advantage of lower charges, but that's no guarantee that future returns will outperform Ark Life. Ark Life may levy charges if you encash/transfer your plan at this stage, or may not allow you to transfer your plan.

From [url]www.pensionsboard.ie:[/url]

"All RACs taken out after 6 April 1999, or earlier contracts where the insurance company agrees, can be transferred to another RAC. This transfer value can also be paid to a PRSA, by mutual agreement between you and the insurance company concerned."

So it looks like Ark Life would have to agree to allow you to transfer your pension to QL. If they don't, you can always stop contributing to the Ark Life pension and contribute all contributions to QL (or any other pension provider)

Tree Scape

Thanks for that.
I suppose the first thing is to find out exactly from Ark Life the implications of transferring, knowing them they will have charges for stopping it But it might give me some bargaining power in them dropping some of the current charges they level on it.

Quinn charge 1.2% on the value of the fund annually.....Ark (I think) charge 0.75% but there's also a bid/offer spread and only 95% of contributions go to the fund......so I might be able to bargain them down on their charges....

CCOVICH

Tree Scape wrote:

Thanks for that.
I suppose the first thing is to find out exactly from Ark Life the implications of transferring, knowing them they will have charges for stopping it But it might give me some bargaining power in them dropping some of the current charges they level on it.

Quinn charge 1.2% on the value of the fund annually.....Ark (I think) charge 0.75% but there's also a bid/offer spread and only 95% of contributions go to the fund......so I might be able to bargain them down on their charges....

No harm trying, but you're only a small fish in a big pond I'm afraid! Also, it would appear that it is their call as to whether you can transfer the balance or not (as it is a pre 1999 pension). If you went through a broker, they may have been able to negotiate, but Ark Life won't undercut their brokers (if they use brokers?).

The worst case scenario is that you stop paying in to the Ark Life fund, you will may benefit from growth on the contributions originally invested.

ck1

Under pension act all companies must have the facility to transfer pensions to another and additionally the new company accepting the pension cannot pay out commission regardless whether it is being put through a broker. What you might find is that the contract was set up with what was called Initial and Accumulation units whereby one unit type has a high management charges. If this is the case, and I would assume not unless it is a quite old contract, the extra management charge that would be charged until the retirment age could be front loaded which would affect the transfer value.

What companies may or may not accept and I have yet to see one accepting one in about 15 years is a GMP but by the sound of your it falls under Personal Pensions and GMP would not be applicable.

In relation to funds and the charges, I think you would find it very difficult to negotiate lower AMC within pension contracts particularly. But by the way, the AMC is not the only charge that Quinn Life impose!!

Tree Scape

sounds like i'm screwed wither way:rolleyes:

RainyDay

You need to split this out into 2 seperate decisions;

1) Should I keep paying into the Ark Life policy?
2) Should I move the funds already in the Ark Life policy?

In relation to number 1, you'll probably find that Ark are taking entry fees (aka bid/offer spread) of around 3.5% of every contribution. If you don't feel your getting value for this fee in terms of investment performance, then stop paying in.

In relation to number 2, look at the annual fees against their investment policy. Ark are 'active' investors (i.e. they try to pick the best stocks for you) whereas Quinn are 'passive' (just buy the index, i.e. spread your investment against the top shares in the market). Which approach do you believe in?

hamster

Tree Scape wrote:

Quinn charge 1.2% on the value of the fund annually.....Ark (I think) charge 0.75% but there's also a bid/offer spread and only 95% of contributions go to the fund......so I might be able to bargain them down on their charges....

Hi Treescape. Just to add to Rainyday's comments. Please take the annual charge into account as well.

You say you pay 0.75% per year to Ark life while you pay 1.2% to Quinn? Now imagine you have 100K in each. Obviously, Ark Life is cheaper even with spread/bids of 5% per contribution right? Because the entry cost is a once off 5% on only the new contribution. After that it's 0.75% on the entire amount each year - Long term it's the lower annual charge that is important.

Having said that, I don't believe you got 0.75% from Ark Life! Are you sure it's not 1.5% or around there? 0.75% charge / year is quite good -

Your Ark Life is probably a typical Managed Fund? Invested in a mix of Growth stocks and cash? Does the fund have a name? ie... check here
http://www.arklife.ie/servlet/ContentServer?pagename=AIB_ArkLife/Miscellaneous/al_x_printer&c=AL_Article&cid=1027674464245

Your Quinn Life one is probably EuroZone or US or Irish index trackers? These follow closely to growth/fall of the appropriate index - not those guarenteed tracker products). 1.2% sounds familar. You may find a tracker falls hards and rises as sharp as the real indices while a Managed Fund will not fall as much (some typically contain a cash element) and also not rise as much as the tracker (for the same reason). Also, they can't 2nd guess the market continously... and it gets worse for them the longer they try. As long as tracked index goes up (long term!) so does your pension. No guarentee that the index will... but in that case I feel confident that a Managed Fund would certainly not do much better unless it a specialist type in the first place (which is a big risk).

Tree Scape

I'm pretty sure the Ark Life is a Pension Managed 2
02-Jan-97
bid 213.37
offer 224.60
1 year19.30%
3 year 30.90%
7 year 18.34%

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this I cannot believe as I'm just about breaking even...although they had some stupid non-contributory month rule which meant I was paying the premium but it never got invested for six months or something
yr to date 16.90%
annualised 6.62%

(I notice that the largest portion is invested in AIB - there's a shock!)

Quinn policy is Biotech Freeway Fund

I think I'll leave them hang for another year and increase SSIA contributions instead!

I hope Hibernian are better at managing funds than Ark Life ....

RainyDay

Have you clarified the fees that apply to the Ark Life funds?

Tree Scape

Rainy Day...charges are as follows...
Ark Life...annual management fee of 0.75% of fund, units subject to 5% bid/offer spread and also a monthly fee of €4.70
Quinn...annual admin fee of 1.2% of fund and €3.81 monthly fee