Pension Charges 5% up front and 0.75% management fee

rdunphy

Hi Guys, I am self-employed and I am starting a pension, I have spoken to a broker who represents one on the big companies. He has quotes me 2 options for the charges.

A. 5% up front (ie for every €100 I put in he takes €5) and a management fee of 0.75%

or

B. 1.5% Management fee

I think option A sounds better over the long term but it still sounds like a lot of charges. There are lots of funds in the scheme I can select from but I have to select it myself or put it into a general fund.

What do you think am I getting Value?

Kennie1

Firstly is it a broker of a tied agency? A broker sells products on behalf of a third party and is legally responseible if something goes wrong, where as a tied agent represents his/her company and can only sell their products and the company is therefore responseible.

You need to ask "what is the reduction in yeild" for both charging structures. The lower the better in theory. I would generally think a person should go with the lower annual management charge as people rarely pay into a pension for the rest of their working life as circumstances change and the person may need to stop paying for a number of years.

Are you getting value for money based on these charges who knows really depends on the level of follow up service and advice you get from your advisor and the premiums you pay. Some of the online brokers have PRSA's with no entry charges and 0.75% AMC but if you dont understand how pensions work and not being able to ask the seller, this option could prove extreamly expensive through poor decisions as a result of market and regulatory changes!

From your post it would suggest that the broker is selling you the pension on an execution basis because you stated that you have to "select it myself", if this is the case I would say that both sets of charges is very expensive compared to what you can get from online brokers

rdunphy

Thanks for this advice Kennie. I was dealing with a tied agent selling only one company’s product.
You make a good point about the lower management fee over the long term. I may not always be self employed so I will try to get the lowest management fee as possible and protect as much of the capital I will have put in.
I will also have a look at some of the on line brokers you spoke about before I make a decision. Can you suggest any or is that against the rules?
Also what do you mean by Regulatory Charges?
Thanks again for your help.:)

Kennie1

Any of the online brokers really just google "low cost prsa" Again you need to have a good understanding of how pension's work for this to be a cheep option. Sorry I meant to say "regulatory changes" in stead of "regulatory charges".