Ultimate Guide to ARF Charges &  Fees

Ultimate Guide to ARF Charges & Fees

ARF Costs will have a huge effect on your ARF investment returns and its long-term value, this ultimate guide to ARF charges and fees, is designed to help you keep them to a minimum.

We charge our clients a maximum annual charge of 0.25% of their ARF fund value regardless of fund size or any other factors and for investible funds over a million, this can be further reduced.

In seeking minimum charges, the first and most important thing to understand is that there are actually three combined charges levied against your ongoing ARF investment. The first is the “Fund Management Charge” the second is the “Investment Support Charge” and the third is the “Trading Charge”, which differs amongst all individual funds (often not disclosed other than in the small print).

The first 2 charges are combined and expressed as a single charge called the AMC or annual management charge in addition to which small trading charges will also typically apply.

After that in terms of once-off fees, an arrangement fee may also apply, depending on the ARF investment amount, the complexity of the ARF advice needed and the resulting set-up process required.

Annual – ARF Charges Breakdown:

1. Fund Management Charge (FMC)
This is an annual charge levied by the Fund Manager for the ongoing investment management of your chosen funds and may be referred to as an FMC.
This will typically vary from 0.50% PA (funds over 500K) to as high as 1.00% PA, dependent on the amount you have to invest and the type of funds you select.

2. Investment Support Charge (Market Analysis)
This is an annual support charge made payable to your Financial Advisor (again levied directly against your ARF fund) for the provision of ongoing strategic investment advice, together with any related legal and tax guidance over the lifetime of your ARF investment.

3. Trading Charges (operational)
Most all fund options carry additional nominal costs, which relate to trading costs as well as custodian fees, or where a fund invests in another fund for example an ETF, a CIV (Collective Investment Vehicles) charge may apply. These charges tend to be very small (relative to the total AMC), but you should still insist on their full disclosure for a true cost comparison of your options.

Transparent Charging Example:

Once you set up your ARF the “Fund Manager” and “Financial Advisor” charges will be expressed as a single AMC charge in your policy contract, so for example (200K ARF investment) a 0.75% FMC + a 0.25% advisor service charge would result in a total annual charge of 1.00%% PA, displayed in your policy documentation as a 1.00% AMC.

However, a small additional trading charge will also exist (but may not be disclosed) e.g. Zurich PRISMA 4 has an additional trading charge of: 0.07% PA.

Once Off – Direct ARF Advisor Fee

Your financial advisor may charge a once-off set-up fee for the work involved in assisting with the set-up of your ARF and your Retirement Benefits claim process or for a second consultation where they have prepared a set of personal investment recommendations. This is especially likely where you are transferring more than one pension contract into your ARF. But be careful of advisors who highlight the fact they don’t charge set-up or consultation fees and use this fact to charge a higher ongoing AMC as this will have a much greater impact on your long-term investment returns.

Also, it’s very important to appreciate and distinguish between the process of (1) Claiming your retirement benefits e.g. Tax-free lump sum and ARF, and (2) ARF application which requires risk profiling, needs evaluation, bespoke investment advice, proposal completion, and transfer follow-up.

Sometimes, it is best to use your existing advisor/schemes broker on the claim side and your newly appointed advisor on the ARF application side, so as to avoid paying additional direct fees for assistance in claiming your retirement benefits. But again, be careful of the advisor who states that they will handle the benefits claim piece in addition to the ARF application, as it could very well lead to a higher AMC!

What About Fund Choice?

There are 6 main fund-based providers in the Republic of Ireland: New Ireland, Zurich Life, Standard Life, Irish Life, Royal London, and Aviva all of whom provide a wide range of unit-linked (mutual) multi-asset fund choices, through both their own internal and external fund managers, under their ARF products.

Most of these fund-based providers offer both active and passive fund choices, with fund options to suit all investor types, from low to medium and even higher risk investments!

It is also possible to choose a self-directed solution, where you can choose your own equity-based investments, ETFs, and structured products directly, but this option is best suited to experienced investors, with strong investment market knowledge and adequate time available to them. Dependent on the size of your ARF it can also prove more costly, with separate trading costs in addition to plan costs.

Top Tips

1. Cost is the first thing to get right so remember to insist on full transparency, trading costs are not always made obvious and although they’re nominal, for a proper comparison demand them.

2. Reduced cost will become much less impactful if you choose the wrong advisor, look for a bespoke multi-asset and multi-fund portfolio that is well explained, not just a single fund currently topping the league tables.

3. Don’t only focus on cost and lose sight of the importance of long-term strategic investment risk management. A direct salesperson is limited in their fund offerings and only interested in making the initial sale. An ARF is a long-term investment that needs broker expertise in terms of comparative advice, specialist investment knowledge, and long-term specialist support.

ARF Quotation Advice

1. Always start with a personal investment risk profile analysis, so that the funds that come recommended to you match your risk requirements e.g. ESMA 3 low to medium risk, as well as your sustainability preferences (is ESG important to you).

2. Never accept just one fund recommendation, insist on an ARF provider comparison, based on both fully transparent charges and past performance, aligned to your risk profile. This should ideally include 3 product providers and up to 3 fund options from each.

3. Always investigate your Financial Advisors’ credentials how long are they in operation, what is their background in pensions and investments, and what professional qualifications do they hold? (A quick LinkedIn search on Google is the best way).

ARF Charges – Key Takeaways!

1. Never accept less than 100% investment allocation.

2. Never agree a base fund manager charge, FMC in excess of 0.75% PA or 0.50% PA , if your fund exceeds 500K to be placed with the one ARF provider (0.45% may also be available on some passive funds).

3. Ongoing broker advice is paramount, but this charge should be kept to a maximum 0.25% PA built into the AMC to cover regular reviews and access to professional advise when ever needed.

4. If you have a large number of pension plans, each will require a separate claims process and separate transfer into your new ARF. Where this added complexity and added workload exist, most advisors will charge an additional administration fee. Discuss and try to negotiate this!

5. If you are a member of a large pension scheme where the scheme administrators are offering pension and ARF-related advice, remember you still have the right to choose your own impartial financial advisor, and you should be conscious of forming a long-term relationship based on choice, transparency, and expertise. Don’t be fooled by financial advisors already associated with your pension scheme who say the process will take longer if you don’t use them.

Why Choose One Quote Financial Brokers?

Access to the right Fund Managers and Fund Options is key, we offer over 25 fund managers and over 200 funds, all risk rated to suit your personal financial needs. Moreover, our expertise, knowledge, and experience mean all recommended ARF portfolios are bespoke and include:

1. Free Initial 40 minute Consultation.

2. Lowest fully transparent charges.

3. Service 24/7 Online access, annual portfolio reviews and market updates.

Our 3 Stage – ARF Advisory Process

A. One Quote Financial Brokers provides a free no-obligation ARF consultation.

B. With your go-ahead, we then produce your investment risk profile, followed by a detailed market comparative report, to help you to choose the most appropriate funds.

C. Finally, we produce a personalised report outlining the effects of charges, investment returns, and withdrawals on your ARF over its lifetime.

Frequently Asked ARF Charge Related Questions:

Why should my financial advisor receive annual payments from the fund provider?

Some people may wonder why the financial advisor should receive an ongoing payment once their ARF has already been set up? The answer is that ongoing service is paramount to the prudent investment management of your ARF over its lifetime.

It is key to develop a relationship with your chosen advisor from the get-go and to understand that changes in your Health, Family Circumstances, Tax Law, and Investment Market Volatility are all long-term considerations. Your ARF is an asset and should also form part of your will and will have inheritance tax considerations, whilst, in addition, an annual review is a regulatory Central Bank requirement.

What is meant by the AMC?

The AMC on your ARF is the annual management charge levied directly against your fund value, it combines a payment to the fund managers who manage your chosen funds and make payment to your financial advisor, who provides personal financial guidance pertaining to your investment.

What is meant by a service charge?

A service or support commission is an annual percentage charge levied against your ARF fund to pay your broker or advisor for ongoing support over the lifetime of your ARF investment, it is built into your AMC.

What is meant by the allocation rate?

This is the percentage of your money that is invested on day one. As mentioned previously never accept any less than 100%.

What taxes are payable on ARF withdrawals?

ARF withdrawals are subject to your marginal PAYE tax rate (currently 20% or 40% after your tax-free allowances), PRSI & USC. However, from age 66 no PRSI applies and from age 70 the USC rate is substantially reduced.

What are my initial & ongoing ARF considerations:

• Income Sustainability – what level of income drawdown can my AMRF/ARF sustain?
• Fund Choice – Do I have adequate fund manager and fund selection options?
• Ongoing Support – Does my advisor offer adequate investment risk monitoring?
• Tax – Do I understand the income tax and inheritance tax implications of my ARF?
• Inheritance – what are the possible inheritance opportunities I should be aware of for my ARF?
• Investment Risk – Am I comfortable with the risk profile of the income-generating funds?

What represents fair ARF charges for ongoing ARF/AMRF investment updates and advice?

It is a Central Bank regulatory that all Financial Advisors provide an annual review as standard, to all ARF clients, given the long-term nature of these post-retirement investment products!

We believe that an annual support charge of 0.25% is extremely competitive in the provision of our comprehensive ongoing support, which includes all the services below:

1. 24/7 online PIN Access.
2. Annual investment reviews and benefit statements.
3. Taxation updates as appropriate.
4. Legislative updates as appropriate.
5. Fund switching support when required.

Can I move my existing ARF?

To avoid any penalties, you normally need to wait 4-5 years from the ARF start date, after which you can transfer your ARF to a new provider. However, you can switch funds for free with many providers.

Why do small differences in charges make a big difference?

Here also is a very interesting Irish Times article on how typical provider and advisory ARF fees can suck the lifeblood out of your investment.

Free Initial Consultation

Prior to contact, please note the following information will be sought:

1. Your name, age, and contact number.
2. Proof of existing retirement benefits.
3. Current value of existing retirement benefits.

Contact: Ken O’Gorman – Director – QFA, SIA, MCIBS – Investment Specialist – One Quote Financial Brokers on: 01 845 0049 or email: [email protected]

Learn more about how ARF’s work once set-up!

Or enquire online and give us a quick outline of how we can help.

Please Note

There is no charge for an initial consultation, so if you want to be assured of the lowest charges and maximum fund choice, with dedicated long-term support, do not hesitate to contact us.