Investment fees and charges

Investment charges can vary widely depending on the type of investment. This section provides you with the right questions to ask and shows the fees and charges on your investment products, such as;

Tracker bonds
Unit-linked funds
Share dealing charges
Tax on investment growth - (applies to unit-linked funds, with-profit funds and tracker bonds)

Charges on tracker bonds

You won't be able to compare fees and charges on tracker bonds, as these are already built into the product from the start. However, you can compare tracker bonds by looking at other features.

Comparing tracker bonds

Features	Details
Investment amount	How much do you need to invest?
Investment term/Access to your money	How long will you have to leave your money invested? You cannot usually withdraw your money until the bond ‘matures' (becomes due for payment), otherwise you will lose money.
Return	How much of the growth of the index could the bond earn? Is there a maximum limit and Is there any minimum return promised? Try to compare the return with what you might get on deposit for the same amount of money over the same term.
Guarantees	Does the bond offer 100% capital security? If not, how much of your capital may be at risk? Remember, less capital security may mean the bond offers higher potential growth.

You will generally be charged an exit tax on these type of investments. This is a Government tax, deducted by the investment or life assurance company, charged on any growth in your investment when you withdraw all or part of it, or on certain anniversary dates, for example every 7 years.

If your investment has not grown in value, no tax is charged.

Charges on unit-linked funds

It is important to examine the fees and charges for these products - they can significantly reduce the value of your investment, especially the charges that are ongoing and are based on a percentage of your investment. These have a bigger impact because the charge itself gets bigger the more your investment grows. For example, a 5% charge on €10,000 will cost you €500 but if your investment grows to €15,000, the same 5% charge will cost you €750.

Funds with high charges may or may not perform better than similar funds with lower charges. Since you can't predict how your investment will perform, you are better off avoiding products with high charges.

With many different charges, it can be difficult to understand exactly what they might mean for your investment. One way to compare products is to look at the 'reduction in yield' (or RIY).

The charges that may apply to unit linked funds are:

Allocation rate - the percentage of your investment that is used to buy units in a fund. A 98% allocation rate means that for every €100 you invest, the investment company invests €98 and takes €2 as a charge.

Bid/offer spread - the difference between the price to buy and sell units in a fund. If the difference is 5%, it means that €5 out of every €100 used to buy units is taken off as a charge. As a result, the value of a €100 investment would fall to €95.

Monthly policy fee - this is usually a fixed amount charged each month, typically ranging from €3 to €6. It is taken either directly from your investment or from the value of your fund.

Product management fee - this is sometimes charged for ongoing advice from a financial advisor or stockbroker. It may be 1% to 2% of your fund value each year.

Yearly fund management fee - this is a set percentage of the value of your investment fund that is taken each year to pay for managing the fund and other general costs. It typically ranges from 0.75% to 1.5% of your fund value. As your investment fund grows, the euro value of this charge increases.

Early encashment charge - this is a fee you may be charged for any money you withdraw in the first few years. Typically, it ranges from 1% to 5%. The charge is highest for withdrawals in the first year and reduces for every year after that.

Share dealing charges

The usual way to buy and sell shares is through a stockbroker, so you will be charged for buying and selling shares.

Stockbroker fees - these vary depending on the type of service you use. If your stockbroker just acts on your instruction without giving you advice, (an 'execution-only' service), your fees will be lower. You will have to pay higher fees for a 'discretionary' service, where the broker makes certain investment decisions for you or for an 'advisory' service, where they give you advice on which shares to buy or sell.

Stockbroker commission - the typical commission rate for buying and selling shares is 1.5% to 2% of the purchase or sale value or a minimum flat fee.

Charges will vary between different stockbrokers, so if you are planning to buy shares for the first time, find out what the levels of charges are and ask for a full list of all charges. Your stockbroker is obliged to give you this information if you request it. Check out charges for online stockbroking, as you may get a better deal.

Tax on investment growth (applies to unit-linked funds, with-profit funds and tracker bonds)

If your investment has not grown in value, no tax is charged.