There was a bit of a stir in the financial advice community when Royal London arrived in the Irish pensions market.
The UK mutual insurance society had been active in the Irish protection market for many years, when it decided to broaden its reach last November, launching a PRSA as part of its burgeoning Irish pensions business.
So why the stir? The new entrant opted to publish its pricing structure on its website, with access for all – and some competitive charges. It has brought a welcome dose of transparency to a market that savers have often found tricky to navigate, given the myriad charges that can apply.
It’s not a perfect outcome; the taxation system around investing in Ireland still needs to be updated, while costs are still less competitive than elsewhere. But, thanks also to the arrival of new online players, which often offer a more cost-effective product, competition is finally beginning to crunch.
“It’s only the start,” says David Quinn, managing director of Investwise.
This is good news for investors.
Status quo
Many Irish investors make their first move into the markets via a life-wrapped product sold through a bank, a life company or a financial adviser.
The advantage of such products is that tax, via the gross roll-up system, is taken care of for you. So, no filing reports with Revenue.
The downside, however, is that investing this way can be expensive.
Contrast Irish Life’s Indexed Ethical Global Equity fund with Blackrock’s iShares MSCI World Screened.
Both track the MSCI World ESG Screened Index – but have different charges. The iShares fund has a total expense ratio of just 0.2 per cent: Irish Life’s fund has a fee of 0.75 per cent.
And it’s not always clear what the full extent of charges on Irish funds are, as we don’t have a total expense ratio (TER) or total cost of ownership approach.
“Costs were opaque, with the cost of advice, administration and investment management all built into one single annual fee,” says Quinn.
And, given how financial advice works in Ireland, where advisers can still be paid under the commission model (the UK banned this in 2012), the total costs of these products are not always clear.
“This annual fee often includes an upfront commission payment to the sales adviser,” says Quinn, adding that the annual cost of such a fund is about 1.5 per cent.
As he notes, there can be further “hidden” costs in a fund, which are not always required to be disclosed under regulatory rules. These can be as high as 0.5 per cent, bringing the total cost closer to 2 per cent per annum.
That’s a hefty deduction from any possible gains your fund might make.
New options
But, the tide might be turning. In 2022 Royal London, which already has a protection business in Ireland, became the first new pension provider to enter the market in more than a decade – and the first life assurance company in more than 30 years.
It first brought approved retirement funds (ARFs) and a personal retirement bond to the market and then, last year, launched a PRSA.
And it’s just the first step.
“There are lots of exciting plans for the future as we plan to grow this side of the business,” says Noel Freeley, chief executive of Royal London Ireland.
Quinn says Royal London’s “aggressive pricing” has put some of the other providers under pressure.
Royal London now offers ARFs and PRSAs in the Irish market, with annual fees as low as 0.35 per cent (remember financial advice fees will also apply, as this is the wholesale price, and it applies on savings above a certain level).
Royal London also offers its customers a value share.
“It’s an additional boost that may be added to customers’ fund returns in years that the company does well,” says Freeley. “Though not guaranteed to be awarded every year, once awarded, it belongs to the customer and can never be taken away.
“In April 2025, value share was awarded for a third year in a row.”
This year, it was paid out at a level of 0.13 per cent, thus driving down annual costs to just 0.22 per cent. “It’s unbelievably competitive,” says Quinn.
While “you can’t bank on the value share”, as it is a discretionary payment, it has been “fairly consistent” in recent years, he says.
Not only that, but Royal London also put its charging structures on its website; typically such payments are hidden behind broker-only access areas.
They show ARF charges of 0.4-0.9 per cent, depending on the assets in the fund.
According to Freeley, transparency is important to the company.
“Our research identified key areas that were important to customers, such as perceived affordability, which was the main reason for people not having a pension at the time. Therefore, pricing and transparency on fees and charges was important,” he says.
More competition
It’s putting pressure on other providers to be more competitive.
Irish Life, for example, is understood to have recently cut charges for underlying contracts taken out on its Portus platform by 10 basis points – that is, from 0.5 per cent to 0.4 per cent.
And, as Quinn notes, the move towards cheaper index funds has made it clearer for investors that they may, in certain circumstances, be overpaying.
This has also put product providers under pressure to keep costs down.
“People are more cost conscious,” he says.
Indeed, a spokeswoman for Aviva says that while it has not cut retail charges of late, it has launched a “number of lower-cost passive investment options for consumers” to complement its existing range of active funds.
New players
The incumbent players are also facing a wave of new competition from the likes of Revolut, Interactive Brokers and deGiro.
These offer low-cost access to a range of investments, such as exchange-traded funds and shares.
For example, Revolut says you can invest €1,000 in the iShares S&P 500 UCITS for a total cost of just €0.73 after a year (based on growth of 7 per cent, and a TER of 0.07 per cent).
Such investments are typically bought on an execution-only basis, which means investors won’t benefit from financial advice – but nor will such fees apply.
And, while tax can be an issue, particularly when it comes to ETFs and deemed disposal, change might be coming on this front.
Last October, then minister for finance Jack Chambers published the latest communication in a possible reframing of taxes in the investment fund sector. As pointed out numerous times in the consultation process, the Irish system for taxing investments is inconsistent and off-putting for investors.
[ Investors still face wait for overdue Irish ETF tax reformsOpens in new window ]
There is a growing expectation that changes will be announced in this year’s budget, after they were included in the 2025 programme for government.
According to a spokesman in the Department of Finance, officials are “reviewing options for measures that could be taken to assist with retail participation in capital markets”, taking into account developments at an EU level in respect of the Savings and Investments Union.
Making the investment landscape more tax-efficient should mean ETFs that are easier to account for and cheaper – and bring about another wave of much needed competition for beleaguered investors.
