Thursday 8 December 2016

Cut your fees by switching funds, pension savers told

Charlie Weston Personal Finance Editor

Published 28/02/2012 | 05:00

PEOPLE paying into a private pension fund were urged yesterday to seek out a better deal on the charges being imposed on their fund.

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High charges could eat up €100,000 of the fund of someone expecting to retire with an income of €33,000.

A new survey has found eight out of 10 of those with an interest in private pensions believe charges should reflect the performance of retirement funds.

The survey conducted by IFG Corporate Pensions found that 84pc of trustees, finance directors and others with key responsibilities for company schemes say fees and charges should be reduced when funds make poor returns.

Returns for Irish pension funds are among the worst in the western world. Group pension managed fund returns over the past 10 years have been 1.8pc a year on average. Average inflation has been 2.1pc over the same period, according to Rubicon Investment Managers.

Most defined benefit, or company pension schemes, are in deficit.

The IFG survey found most of those charged with looking after defined benefit schemes were dissatisfied with the fees and charges structure.

Impact

This is because fees of between 0.25pc and 1pc of the value of the fund get charged annually, no matter how the fund performs.

Samantha McConnell of IFG said the system of paying fees regardless of performance would have to change.

The survey showed that most of those with a role in overseeing pensions on behalf of workers or companies believe annual fees should never exceed 0.75pc of the value of the fund.

"The impact of fees on pension funds should not be underestimated," Ms McConnell said.

She said a worker earning €50,000 and hoping to retire on two-thirds of final salary, or €33,300, would need a fund of €700,000.

If that person could get a reduction in fees their retirement fund could be boosted by €100,000, she claimed.

Ms McConnell called on people saving into a pension to switch from an actively managed fund to a passive management fund, where the fees tend to be lower

The industry should be required to do more to disclose fees, she added.

The Department of Social Protection has ordered a review of the fees and charges imposed on pension funds.

The Irish Insurance Federation, which represents life companies, had no comment.

Irish Independent

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