Online brokers promise discounts

Two online discount brokers have announced details of special pensions offers aimed at self-employed people in the run-up to the 2004 income tax deadline.

Broker Liam Ferguson of Ferguson & Associates has launched a new website for execution-only deals on lump sum personal pensions from seven different providers.

Ferguson says anyone planning on making a lump sum contribution to a personal pension before the Revenue online service (Ros) filing deadline of November 17th and who does not require financial advice, can save 2-6 per cent by buying their pension on the website, www.nofinancialadvice.com.

The pensions providers featured are Eagle Star, Friends First, Hibernian, Irish Life, New Ireland, Canada Life and Standard Life.

Some discounts have resulted in the elimination of entry charges for higher investment sums. For example, someone with a lump sum of €20,000 or more can invest in an Irish Life personal pension through the site and pay no entry charges, just normal annual management charges.

An allocation rate of 95 per cent is common on personal pensions. This means that 5 per cent of the investor's contribution is not invested, but used to pay commissions.

On an investment of €20,000 into an Irish Life personal pension, the site offers an allocation rate of 100 per cent. On more modest contributions of €2,500-€10,000, the allocation rate is 97 per cent - in other words, the entry charges are reduced to 3 per cent - increasing to 101 per cent for anyone investing more than €40,000.

"We achieve these discounts by reducing our commission from the industry standard levels. We can do this because we are not offering financial advice to the client. Customers availing of this service will already know where they intend investing their money," says Ferguson.

Meanwhile, broker Michael Kiernan, who runs www.myadviser.ie, is running special offers on personal pensions with three providers until November 17th, as long as the investor has at least 10 years until retirement.

Anyone contributing up to €10,000 to an Irish Life pension through www.myadviser.ie can get a favourable allocation rate of 98 per cent.

An allocation rate of 101 per cent kicks in at investments of at least €150,000, compared to just €40,000 at www.nofinancialadvice.com. Myadviser.ie also offers discount deals for personal pensions sold by Friends First and New Ireland. Unlike Irish Life, these providers both charge a bid/offer spread of 5 per cent, which has a negative impact on the allocation rates.

It is important for investors to understand how to compare charges, Kiernan says. To compare a policy with a bid/offer spread of 5 per cent to one with no bid/offer spread, the allocation rate should be multiplied by 0.95.

Thus on a New Ireland personal pension, Myadviser.ie offers an allocation rate of 107 per cent on investments of more than €150,000. Multiplying 107 by 0.95 gives a truer picture of how this compares with the Irish Life offer. After the bid/offer spread is taken into account, the allocation rate is 101.65 per cent. So considering charges alone, Myadviser.ie's New Ireland offer still has the edge on the Irish Life deal.

Both advisers also offer special deals on Eagle Star's personal retirement savings account (PRSA) and its standalone additional voluntary contributions (AVC) PRSA.

An AVC PRSA is open to people in company pension schemes, including public service workers, who wish to make additional voluntary contributions without involving their employer.