Ultimate Guide to Lowest ARF Charges

Ultimate Guide to Lowest ARF Charges

Below, we have put together your ultimate guide to ARF charges/fees, on what to look for when seeking the best ARF advice with minimum costs, or in other words the best value AMRF/ARF’s in Ireland.

Whilst past investment performance and annual investment risk management are key, it’s hugely important to understand and to minimize all associated fees and charges at set-up!

There are 3 possible costs associated with AMRF/ARF’s:

1. Fund Providers – Fund Management Charge (FMC)
There is always a recurring annual charge levied by the insurance / ARF provider for the daily investment management of the chosen funds within your ARF. Fund management fees may vary from 0.5% PA to as high as 1.5% PA and are taken directly from your ARF. This charge is known as the FMC and we believe that for the majority of the most popular multi-asset investment funds you should only ever agree to pay between 0.5% PA and 0.75% PA.

2. Financial Advisor – Financial Advisory Charge (FAC)
This is an annual fee made payable to your financial advisor again directly from your ARF. This fee forms part of the total annual management charge known as the total AMC and is made up of the FMC and the FAC added together. Some financial advisors will charge their clients an annual fee as much as 0.5% PA of their AMRF/ARF fund value, we believe that regardless of all factors including fund choice and fund size, you should never need to pay more than 0.25% PA for ongoing professional financial advice.

3. Financial Advisor – Once Off, Set-Up Fee:
This is where you need to be very careful! Some financial advisors will emphasize that they don’t charge set up fees (which are once-off) but then use this opportunity to charge you a high annual advisory charge for the provision of ongoing investment advice over the lifetime of your ARF e.g. 0.5% PA. It can sometimes be a lot smarter to agree to pay a once-off set-up fee in order to reduce your total recurring annual charge (known as the total AMC).

What About Fund Choice?

There are 5 main fund based providers in Ireland: New Ireland, Zurich, Standard Life, Irish Life and Aviva, all of whom provide a wide range of multi-asset fund choices, through both their own and external fund managers.

New Ireland, Irish Life & Zurich offers both active and passive fund choice whilst Zurich also offers protected funds and ETF’s. All others offer active fund management. All providers offer funds to suit all investor types from low to medium and high-risk options!

A good Financial Advisor should never promote just one particular provider, so you should seek a detailed comparison of allocation and charges across all the leading providers for which they hold an agency.

Make sure that you choose appropriate funds to match your risk attitude, but also understand the difference between passive funds and active funds and ensure that there are no charges for future fund switches.

Key Take Aways!

A. Don’t be afraid to ask questions, it’s your hard-earned pension pot after all! The key point is that with 100% investment allocation of your money as a given to minimize both the annual provider and the annual advisor charges, so when combined they fall between 0.75% and 1.00% PA.

B. Don’t rush into signing paperwork or allow yourself to be pressured by your financial advisor for an immediate decision, always shop around and once you understand the charges then examine past investment performance.

C. 100% investment allocation should be standard, with bonus allocation sometimes made available. Don’t be fooled by any financial advisor who highlights the fact that they don’t charge allocation fees, no reputable financial advisor should invest less than 100% of your pension pot and in fact, in some cases, it is possible to negotiate a bonus allocation (See FAQ below)!

D. One Quote Financial Brokers provide a no-obligation AMRF/ARF quotation and promise to beat any other like for like AMRF/ARF quote on the Irish market!

Frequently Asked Questions:

How can I get more than 100% of my pension pot invested?

Many people wonder how ARF providers can allow more than 100% allocation of your money and if you get higher where this money actually comes from? The answer is that the bigger your fund value the more the provider is willing to attract your business and they will pay for it with bonus allocation. They make their money back through their annual provider charge overtime!

Why should my financial advisor receive an ongoing payment?

Some people may wonder why the financial advisor should revive an ongoing payment once their AMRF/ARF has already been set-up, but for the greater majority of retirees, this ongoing service is paramount to the prudent management of your ARF over its lifetime. Remember, changes in your Health, Family Circumstances, Tax Law, and Investment Market Volatility are all long term considerations. Whilst, in addition, an annual review is a regulatory Central Bank requirement.

What are my initial & ongoing AMRF/ARF Considerations:

• Income Sustainability – what level of income drawdown can my AMRF/ARF sustain?
• 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 I have in my ARF?

Do I have to pay my financial advisor an annual financial advisor fee levied against my AMRF/ARF?

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

We believe that an annual fee of 0.25% is extremely competitive and well justified in the provision of our comprehensive AMRF/ARF annual review investment advisory service, which includes:

1. Annual valuation report.
2. Annual investment risk profiling.
3. Review of health and family circumstances.
4. Review of income requirements.
5. Review of any changes in tax or pensions law.
6. Annual valuation report.

However, in some cases, especially where you the client would expressly prefer to absolutely minimize the total AMC fund charge, then our standard annual financial advisory charge of 0.25% PA (levied directly against your AMRF/ARF), can be replaced with the following direct fees:
Where your post-retirement investable fund is less than €300,000

  • A once-off set-up fee of €650.00 invoiced directly.
  • An annual review fee of €300.00 invoiced directly.
    Where your post-retirement investable fund exceeds €300,000

  • No Setup fee.
  • An annual review fee of €300.00 invoiced directly.

    Can I move my existing AMRF/ARF for lower costs?

    To avoid any penalties, you normally need to wait 5 years from the ARF start date, after which you can transfer your ARF to a new provider with a lower total ongoing charge.

    What is meant by the total AMC?

    The AMC on your AMRF/ARF is the total annual management charge levied directly against your ARF fund value. It is made up of the base AMC charged by your fund provider and the annual financial adviser charge, expressed as a single charge once your AMRF/ARF is set-up.

    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% on your AMRF or ARF and always ask if bonus allocation is applicable.

    Why are AMRF/ARF fees so important?

    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.

    For more information

    Contact: Ken O’Gorman – Director – QFA – Pensions & Investment Specialist – One Quote Financial Brokers on: 01 845 0049 or call me directly on: 087 665 8516.

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

    Remember there is no charge for initial advice or quotes nor any obligation to proceed and our promise is to beat all competitor offers!

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