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executive pensions

40701085

Sorry if this is in the wrong forum...

Any tips on which banks (if any) provide executive pensions with competitive charges. Looking for something with less than 5% contribution charges, and preferably less than 1% management fee.
Not too bothered about fund performance yet and am in the early stages of pension savings so plenty of yrs to go!

Thanks for any advice

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Alan152

40701085 wrote: »

Sorry if this is in the wrong forum...

Any tips on which banks (if any) provide executive pensions with competitive charges. Looking for something with less than 5% contribution charges, and preferably less than 1% management fee.
Not too bothered about fund performance yet and am in the early stages of pension savings so plenty of yrs to go!

Thanks for any advice

Hi. You would be able to get a 1% annual mgt charge no problem and no contribution charge. As working in the business only prsa plans would have a contribution charge. 100% allocation should be common these days.

Alan

40701085

Thanks. Have looked in a couple of brochures from the main banks and they're charging 5%, stepping down to about 3.5% with higher contributions. Is it something that can be negotiated?

The J Stands for Jay

Maybe look beyond the banks.

SBarrett

Hi 40701085

You seem to be referring to PRSA's with the 1% management fee and premium charge. An executive pension is different, it is a company paid pension. If you are having employer contributions paid into a PRSA, you are liable to USC on contributions.

Under executive plans, there are a number of different allocation rates and management fee structures. The bigger the premium, the better the rate you get. Also, are you paying the advisor a fee or a commission? If you go to a bank, you can only pay commission and have to go with the provider that they use. If you go to an advisor, you can pay a fee and get a fair analysis of the market.

Steven

NewCorkLad

40701085

Forget about the banks their charges are nearly always higher than in the open market and their on going service is usually shocking. Talk to an independent adviser, you will get a much better analysis of the pensions available out their and you will be able to meet the same person again whenever you want to review your pension.

40701085

SBarrett wrote: »

Hi 40701085

You seem to be referring to PRSA's with the 1% management fee and premium charge. An executive pension is different, it is a company paid pension. If you are having employer contributions paid into a PRSA, you are liable to USC on contributions.

Under executive plans, there are a number of different allocation rates and management fee structures. The bigger the premium, the better the rate you get. Also, are you paying the advisor a fee or a commission? If you go to a bank, you can only pay commission and have to go with the provider that they use. If you go to an advisor, you can pay a fee and get a fair analysis of the market.

Steven

Thanks Steven - the 1% is the fund mgt fee, so I presume common to most if not all funds. If I go to an adviser, does he have access to fund providers that are charging lower application/redemption charges?
I guess I'm curious to know - what is "the market" for exec pensions outside of what the main banks are offering?

NewCorkLad

40701085 wrote: »

Thanks Steven - the 1% is the fund mgt fee, so I presume common to most if not all funds. If I go to an adviser, does he have access to fund providers that are charging lower application/redemption charges?
I guess I'm curious to know - what is "the market" for exec pensions outside of what the main banks are offering?

Do you mean providers?

If so, Irish Life, Zurich, Aviva, Standard Life, Friends First all provide exec pensions as an example. There are alot of options out there depending on your situation, with varying charging structures and investment options.

SBarrett

40701085 wrote: »

Thanks Steven - the 1% is the fund mgt fee, so I presume common to most if not all funds. If I go to an adviser, does he have access to fund providers that are charging lower application/redemption charges?
I guess I'm curious to know - what is "the market" for exec pensions outside of what the main banks are offering?

The management fee and allocation rate (how much of your money is actually invested) are linked. If you want a higher allocation rate, the management fee is usually higher. If you want a lower management fee, your allocation rate is usually lower too. Then there is how much money are you contributing. The insurance companies will give better rates for higher premiums.

The problem with banks is that they are tied to one company and you talk to someone who is under pressure to meet weekly targets set by management. His sole goal is to meet his weekly target so he doesn't get in trouble and can still get his bonus. He isn't able to think outside the box, he has to tow the company line.

A good advisor will assess your needs, design an investment strategy to suit your needs and work with you to achieve what your target...or even get you thinking about what that target is as most people don't think what they want at the end of it. Of course they are going to charge for the work they do, be it through a fee or commission but for the good advisors, it is about long term profitable relationships and not a quick win and moving on.

40701085

The more I think about it the worse it seems:

€100 less 3.50 allocation (at best?), less €1 mgt fee less €0.25 admin/custody fees, less €0.15 govt levy means you are down 4.9% before you start.
Factor in inflation at say 1% and any fund would be doing well to make returns that cover these costs year in, year out.

I appreciate I may be over-simplifying a bit but I don't know how these can make you decent money.

NewCorkLad

It is possible to get an exec pension with 100% Allocation and 1.25%AMC, factor in the government levy of 0.15% and you are looking at trying to acheive 1.4% a year to break even before inflation is taken into account.

Zurich's managed funds have acheived a return of 6.92% annualised over the last 10 years.

Taking into account the tax releif you get and the fact that your returns roll up tax free, pensions are still a very good option. You will not get rich from your pension but you can have a comfortable retirement if you plan it correctly.

Liam D Ferguson

40701085 wrote: »

The more I think about it the worse it seems:

€100 less 3.50 allocation (at best?), less €1 mgt fee less €0.25 admin/custody fees, less €0.15 govt levy means you are down 4.9% before you start.
Factor in inflation at say 1% and any fund would be doing well to make returns that cover these costs year in, year out.

I appreciate I may be over-simplifying a bit but I don't know how these can make you decent money.

Your math is a bit off. The allocation rate 3.5% would only hit you once - when you make the contribution. It doesn't recur year in, year out as you suggest. So while you'd need to make 4.9% in your example to break even, that would only be in the first year. Thereafter you'd need to make 1.4% using your figures.

40701085

Liam D Ferguson wrote: »

Your math is a bit off. The allocation rate 3.5% would only hit you once - when you make the contribution. It doesn't recur year in, year out as you suggest. So while you'd need to make 4.9% in your example to break even, that would only be in the first year. Thereafter you'd need to make 1.4% using your figures.

I don't understand, I thought the contribution charge was on each contribution - monthly, yearly or whatever?

Liam D Ferguson

40701085 wrote: »

I don't understand, I thought the contribution charge was on each contribution - monthly, yearly or whatever?

It is, but you only make each contribution once. So you only need the fund growth to recoup it once, in the first year - not all subsequent years.

Example - you have a pension policy with a contribution charge of 3%, an annual fund charge of 1% and the Government levy of 0.15%. You put €100 into it in January 2015. In 2015, the fund growth has to achieve 4.15% to break even. But in 2016 and all subsequent years it just has to achieve 1.15% to break even. You recouped the contribution charge in year one.

Alan152

40701085 wrote: »

The more I think about it the worse it seems:

€100 less 3.50 allocation (at best?), less €1 mgt fee less €0.25 admin/custody fees, less €0.15 govt levy means you are down 4.9% before you start.
Factor in inflation at say 1% and any fund would be doing well to make returns that cover these costs year in, year out.

I appreciate I may be over-simplifying a bit but I don't know how these can make you decent money.

If you get an executive pension you can get it for 100% allocation with a1% annual management charge and whatever the govt levy happens to be year in year out. If you are doing an exec pension and not a PRSA your allocation should be 100% only older contracts would have a contribution charge

SBarrett

You need to take a long term view at it. With the power of compounding and consistent regular investing, you will easily make great money. I had a client who invested £50 a month into a pension for 30 years. He quadrupled his money over that time. He just started the pension fund, stuck it in a managed fund (there wasn't much fund choice then) and left it.

40701085

thanks for all the advice - I'm currently looking at going with either Zurich or Aviva.
Does anyone know of any material advantages of one over the other (fees and charges seem equivalent, returns probably equally so though I'm not putting too much emphasis on returns at this point)?

Any difference that stands out to you, I'd be glad to hear your thoughts. I know Eagle star/Zurich have been around a while, not sure about aviva (or "Hibernian") though that's because I just don't know them too well.

Thanks again

SBarrett

Both are good companies with some good funds. But what does well today may not do well tomorrow.

A lot would depend on the contract structure you go for as both have a lot of different contracts.

Steven

pitrn

Hey 40601085, curious to know which company you went for with what option as jam also looking to start executive pension plan for myself with Zurich..