A charge taken as a percentage of a contribution paid into a RAC is called which type of charge?

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Prepare for the Qualified Financial Adviser (QFA) Pensions Exam 2. Test your knowledge with flashcards and multiple choice questions. Review detailed explanations for each question and get ready to succeed!

Multiple Choice

A charge taken as a percentage of a contribution paid into a RAC is called which type of charge?

Explanation:
An upfront charge is taken at the time you invest, reducing the amount that actually goes into the RAC. When a charge is a percentage of the contribution paid in, that is an entry charge. It’s different from an ongoing charge, which is based on the fund value each year, or an exit charge, which applies when you withdraw, or a contingent charge, which only applies if a specific event occurs. So the described fee fits the definition of an entry charge.

An upfront charge is taken at the time you invest, reducing the amount that actually goes into the RAC. When a charge is a percentage of the contribution paid in, that is an entry charge. It’s different from an ongoing charge, which is based on the fund value each year, or an exit charge, which applies when you withdraw, or a contingent charge, which only applies if a specific event occurs. So the described fee fits the definition of an entry charge.

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