Irish Investors regularly paying too much for their Pensions and Savings.

Irish Investors regularly paying too much for their Pensions and Savings.

I’m getting so frustrated with the high charges being applied, under the radar, to pension and lump sum investors out there. I am losing count of the number of clients that have come to me recently for financial planning services, who were being charged extremely high fees for recently opened pension and investment contracts. Even well-informed clients can miss the various hidden costs associated with their investments.

If you are not 100% sure what you are paying, please ask the following questions:

1) Is there any deduction from my premium? 100% allocation means there is no deduction and 100% is invested.

2) Is there a Bid-Offer Spread? This is becoming less prevalent, but can still apply. It is a 5% difference between the price you buy at and the price you sell at. It is effectively a 5% charge on your contributions.

3) 100% allocation doesn’t guarantee good value. Also ask what the total Annual Management Charge (AMC) is?  The best pension contracts have an annual management fee of 0.40% total fee, so compare your fee to this level of cost. I have seen AMC’s over 2% in some cases and typically around 1.25%.  A good advisor will also be able to tell you the Total Expense Ratio (TER), which is not readily available and takes additional research to discover.

4) Is there a fixed term or capital guarantee? If there is, then a commission and extra charges can be built into the structure of the product without you knowing.

Ideally ask your advisor for a ‘Nil Commission’ quote for your pension or investment and then compare that to their proposed quote. Ideally you should pay your advisor a fee separately to insure there are no hidden costs. This approach can save you fortunes in the medium to long term, while also locking in better advice.

If you know the answer to all these, then you can decide whether the advisor fee is fair or not and make an informed decision. Simple!!

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