Aviva challenges its rivals by dropping some fees on new pension products
Investment firm Aviva Ireland has put it up to its rivals by dropping administrative and other fees from a new range of pension products.
The new lower-charges regime comes into force for products launched this week.
The only remaining charge to be applied by the pensions provider to the new products is the fund management charge, which it said has been either reduced or maintained at its current level.
Aviva said fund management charges range from 0.5pc to 0.9pc, and claimed these are among the most competitively priced fund management charges in the market.
Managing director of Aviva Life and Pensions Gary Marshall said the changes will result in a big saving over the lifetime of an average pension.
He gave the example of a 35-year-old customer paying a monthly premium of €500 into one of Aviva's new pension products. This person will save €114 a year.
If the customer continues to pay that premium until retirement, the savings could amount to €8,500 over the lifetime of the product, based on average expected returns.
The move comes ahead of plans to introduce a universal pension, as six out of 10 people in the private sector have nothing in place and are relying on the State pension to fund their old age.
Mr Marshall said the decision to abolish traditional administrative charges was Aviva's response to customer demand for simpler pension products with more transparent pricing.
"In our research over the last year, consumers have been telling us they find pensions confusing, even stressful, and they have no handle on how fees and charges impact their retirement savings."
Aviva has already dropped administrative fees for most of its approved retirement fund (ARF) products.
The remaining charge for the management of the investment of its customers' money is between 0.5pc and 1pc. The insurer is actively examining the possibility of applying the same approach to existing pension customers.
Mr Marshall said Aviva's ambition is to make administrative fees and ancillary charges a thing of the past with all customers paying only for the cost of managing the investment of their money.
"It's clear from the fall in pension coverage in the population that faith in pension saving among consumers has been shaken. We want to play our part in restoring it by cutting to the bare minimum the fees we deduct from the hard earned cash our customers put away for their retirement."
There are major questions about the sustainability of the State contributory pension. It is funded on a pay-as-you-go basis from current taxation.
The number of people in Ireland aged 65 and over will increase by almost 300,000 over the next 10 years, from 570,000 in 2013 to 855,000 in 2026.
By 2055, just two people will be working to support every pensioner, down from about five today, according to Central Statistics Office projections.
Aviva's recently published a 'Mind the Gap Report' that found that those due to retire between 2017 and 2057 will have to save, on average, an additional €1,017 a month, to have an adequate standard of living in retirement.