The 1st of November this year marked the 20th anniversary of the Zurich Life (Eagle Star) Balanced Fund. This fund would have an indicative Global Equity exposure of between 50% - 75%, with the balance being held in Bonds and Cash. It's general categorization in terms of Risk/Reward would be aimed at those who are 'Medium' risk takers.
The Balanced Fund did pretty well over this period: so rather that just say that the total gross performance was 632%, I wanted to provide a pension example using a monetary value.
If you invested €5,000 on 01/11/1989 and then paid €100 per month up until 31/10/2009, your total contributions would have amounted to €29,000. The value of your pension fund at 31/10/2009 would have been €84,028*. For an initial contribution of €10,000 and a regular monthly contribution of €250, the final fund value would have been €193,651*.
These figure represent a net annual compound return of approximately 8%.
Disclaimer: My only motive in doing this exercise is to 'translate' the gross 632% into an indicative annual net return.
Warning: Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up. Benefits may be affected by changes in currency exchange rates.
* Assumes a single charge of 1% per annum on the value of the fund ie. that no other charges apply to the product.
www.prsa.ie
Friday, December 4, 2009
Friday, November 27, 2009
An Industry on a 'Collision Course' with itself
In July 2008 I wrote an 'Industry Overview' blog post in which I stated that the Life & Pension Companies in Ireland needed to turn their business model on its head to ensure their future viability. So what has changed in the last 16 months that has given me hope for optimism?
The short answer is: nothing!!
It would appear that the management of these financial institution are running around like headless chickens as they struggle to cope with the reductions in new business and the exodus of existing business.
The main focus of their current business efforts is in 'buying' business. This is predominately directed at the larger corporate broker sector so the 'small' guys, like me, have become surplus to requirements as far as they are concerned. The management line is all about 'developing partnerships' with brokers but they fail to mention that it only applies to the 'big' guys. Needless to say, I have no time for managers that talk-the-talk but don't walk-the-walk.
What I would really like to see happen with these companies is that they seriously look at the following issues :
i) Service - The general level of service to customers is atrocious. Service cannot be defined as processing 'new' business effectively. You have to start looking after existing customers. Customers should be for 'Life not just for Christmas'.
ii) Factory Gate Pricing - Companies have to introduce this immediately. The current model based on full allocation with exit penalties is dead, and you know it.
iii) Simplify Products - There should be a maximum of only two types of charges that can apply to a product.
iv) Embrace Technology - All companies should give their clients full access to their products online. They should also embrace Social Media. There is only one life & pension office on Twitter and the last time they tweeted was 13th August.
v) Acorns - The future viability of your business does not revolve around 'High Net Worth' individuals. It rests with the the folks that want to start something 'small' and build it up in the future.
vi) Moral - You've got to look at boosting the moral of your staff. Your management are severely damaging your employees motivation.
If you continue to do nothing; you will win the race to the bottom of the Life Insurance & Pension market.
The short answer is: nothing!!
It would appear that the management of these financial institution are running around like headless chickens as they struggle to cope with the reductions in new business and the exodus of existing business.
The main focus of their current business efforts is in 'buying' business. This is predominately directed at the larger corporate broker sector so the 'small' guys, like me, have become surplus to requirements as far as they are concerned. The management line is all about 'developing partnerships' with brokers but they fail to mention that it only applies to the 'big' guys. Needless to say, I have no time for managers that talk-the-talk but don't walk-the-walk.
What I would really like to see happen with these companies is that they seriously look at the following issues :
i) Service - The general level of service to customers is atrocious. Service cannot be defined as processing 'new' business effectively. You have to start looking after existing customers. Customers should be for 'Life not just for Christmas'.
ii) Factory Gate Pricing - Companies have to introduce this immediately. The current model based on full allocation with exit penalties is dead, and you know it.
iii) Simplify Products - There should be a maximum of only two types of charges that can apply to a product.
iv) Embrace Technology - All companies should give their clients full access to their products online. They should also embrace Social Media. There is only one life & pension office on Twitter and the last time they tweeted was 13th August.
v) Acorns - The future viability of your business does not revolve around 'High Net Worth' individuals. It rests with the the folks that want to start something 'small' and build it up in the future.
vi) Moral - You've got to look at boosting the moral of your staff. Your management are severely damaging your employees motivation.
If you continue to do nothing; you will win the race to the bottom of the Life Insurance & Pension market.
Tuesday, October 20, 2009
Switching or Changing Pension Provider
If you are thinking of switching/changing your pension provider because you are none too happy about the level of charges on your product, consider the following:
If a person saved €1,000 per month (index linked at 3%) from the age of 30 to 65, the estimated retirement fund at 65 would be €1,472,823. This assumes that there is a 5% contribution charge on each payment made, the annual management charge is 1.5% and the fund grows at 6%pa.
Using the same details for contribution,term and growth rate, but having an annual management charge of 1% and no contribution change, the estimated fund would be €1,673,568.
That's over €200,000 in potential savings. Is that a good enough reason to change?
If a person saved €1,000 per month (index linked at 3%) from the age of 30 to 65, the estimated retirement fund at 65 would be €1,472,823. This assumes that there is a 5% contribution charge on each payment made, the annual management charge is 1.5% and the fund grows at 6%pa.
Using the same details for contribution,term and growth rate, but having an annual management charge of 1% and no contribution change, the estimated fund would be €1,673,568.
That's over €200,000 in potential savings. Is that a good enough reason to change?
Subscribe to:
Posts (Atom)
