Contributors to private funds 'screwed' by fees
Published 12/05/2011 | 05:00
ORDINARY workers were being "screwed" by charges on pensions, a leading pensions representative body said last night.
People with individual pensions were being hit with high charges while larger company schemes were able to negotiate better deals, said the Irish Association of Pensions Funds (IAPF), which represents trustees of company schemes.
Jerry Moriarty of the IAPF said "people at the lower levels were getting screwed on fees".
Studies have shown that high fees in this country can mean up to a third of the value of a pension fund is eaten up in fees and administrative costs.
Charges applied to a typical private pension can wipe out up to 29pc of the value of the fund, according to research by Trinity College academics Jim Stewart and Gerard Hughes.
The study found that fees for additional voluntary contributions (AVC) are the highest.
Up to 40pc of the value of a personal retirement savings account (PRSA) can be wiped out by charges, negating any tax relief. Mr Moriarty said trustees of company schemes would welcome a drop in fees.
But he blamed the high charges associated with PRSAs on the Government, as it had set out the maximum fees that can be imposed by life companies on PRSAs.
Standard PRSAs can charge up to 5pc on each contribution. On top of this, they have an annual management charge of 1pc of the value of the fund.
In contrast, the new mandatory pension in the UK, called Nest, has an annual charge of 0.3pc, with 2pc charged on each contribution.
Mr Moriarty also accused the Government of trying to deflect from the outrage over the imposition of the new 0.6pc private-sector pension levy by focusing on pensions-industry charges.
Taoiseach Enda Kenny has attempted to deflect attention from the controversial €1.9bn levy by calling for a probe into pension fees.
He said private pension funds had been built up over the years with the use of generous tax reliefs.
"This is not a tax on any individual pension," he said. "It is a levy on the funds of a very modest 0.6pc over four years."
Mike Kemp, head of the Irish Insurance Federation, which represents pension providers, dismissed claims that charges on retirement funds were a rip-off.
Asked if charges were not a lot higher than in Britain, he said the UK market had a far higher population and much larger pension schemes.
In the Dail yesterday, Independent Dublin South TD Shane Ross called for an investigation into the pension-industry "gravy train".
"It is a swamp of hidden fees, upfront fees and riches for people who do not deliver to the people they are milking," he said.