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A Fin24 user is questioning the costs and fees relating to his retirement savings. He writes:
My question is in regard to the costs or fees applicable to retirement savings.
As an employee I contribute to a company retirement scheme managed by a third party "manco" and I am allowed to select (regulation 28 compliant) funds to invest in.
As to fees charged, there is a manco fee and investment fee for investing in the funds on a monthly basis.
I have recently been advised that I can select to have my monthly contribution in a fund that I am invested in via discretionary savings.
Since this fund has a total expense ratio (TER), does this result in three fee structures - that is a manco fee, investment fee and fund TER?
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Mike Moore of Mazars responds:
From the reference to the word “manco” in your question, my answer below assumes that you are a member of an umbrella fund, as opposed to a “stand alone” retirement fund.
Umbrella funds are generic retirement funds set up mostly by large financial services companies. Each umbrella fund’s fee breakdown varies widely from the next, as does the level of fee disclosure.
This makes it exceptionally difficult to compare the offerings of different umbrella fund providers.
Whilst I can’t provide you with a direct answer without having more information on the specific umbrella fund, I will explain the general categories of fees charged by umbrella funds so you can put the right questions to your broker.
READ: Retirement planning is more than investing
Umbrella fund fees are broadly able to be split into the following categories:
An administration fee
This is paid to the administrator of the fund for performing functions such as the record keeping of member’s contributions, investments and payments;
An advisory/consultancy fee
This is paid to the broker who is responsible for advising your employer on the specific retirement fund offering to the company’s employees, as well for providing ongoing advice on behalf of the umbrella fund to the participating employer;
A platform fee
If the umbrella fund’s asset manager portfolios are on an investment platform, then a platform fee will be charged;
Annual management fee
Finally, any asset manager portfolio that a member invests in, will deduct an annual management fee and possibly a performance fee - which together make up the fund’s TER - on a regular basis.
Assuming the “manco fee” you refer to, relates to the administration fee and advisory/consultancy fee, then the question is what service does the “investment fee” pay for?
If it is not a platform fee or an asset manager portfolio fee, then I would encourage you to enquire as to what aspect of the offering this “investment fee” relates to.
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