Move is the first time consumers have been hit by negative interest rates
Bank of Ireland is to impose negative interest rates on cash held in pensions, in a move that will hit people saving for their retirement hard.
The move represents the first time negative rates will have been charged to consumers.
Pension experts said more banks were now set to charge for money deposited in pension funds.
Many pension fund holders have mandated their advisers to put their funds into cash as they are nervous.
They fear a recession is on the way that could wipe out investments, as happened with bank shares and property investment values during the last financial crisis more than a decade ago.
And it comes as the regulator, the Pensions Authority, has been encouraging company pension schemes to invest more in bonds and cash, both of which are now giving a negative return.
Bank of Ireland told pension provider Independent Trustee Company (ITC) it will charge 0.65pc a year from September for cash held in pension funds.
Financial adviser Liam Ferguson said huge numbers of people would be affected by the new charge, which is in addition to management fees imposed by fund administrators.
In a letter sent to pension trustee company ITC, Bank of Ireland's head of banking Enda McDonagh states: "A negative interest rate will apply to the credit balances of all specialised accounts from September 15. This rate will be -0.65pc variable per annum."
The bank explains in the letter that European interest rates have been negative for some time and keeping customer money on deposit is a cost to the bank.
Mr Ferguson, of Ferguson and Associates in Carlow, said: "This is the first example that I've seen of an Irish bank charging people to hold their money.
"ITC are one of the biggest providers of self-administered pensions in Ireland."
ITC says on its website that it administers €1.2bn of client funds in 4,000 pension structures.
It told brokers the move would "have an adverse impact" on their clients.
Mr Ferguson said a lot of Irish people would be affected by the move to charge pension funds for holding cash.
He advised those who are not close to retirement to consider putting some of their retirement funds into equities.
Another financial adviser, Padraic Kissane, said: "I am sure more will follow this. Safety comes at a cost now, and this is outside of management fees."
Jerry Moriarty, of the Irish Association of Pension Funds, said the Pensions Authority requires defined benefit schemes to hold additional reserves where they are investing in what are deemed to be risky assets.
"This is mainly any assets other than cash and government bonds. As both of these assets will now result in trustees losing money, it puts them in a very difficult place."
Managed pension funds had their the worst quarterly losses in over a decade in the first three months of the year, due to the pandemic.
But markets rallied strongly during the second quarter to recover much of their Covid-induced losses, according to Rubicon Investment Consulting.
Bank of Ireland said it recently wrote to 14 investment and pension trustee firms to inform them about the new negative interest rate.
It said European Central Bank interest rates had been negative since 2014.
"The average amount held on deposit by investment and pension trustee firms is in excess of c. €100m, therefore it is no longer sustainable for the bank to continue with the current rate of interest."
It provided three months' advance notification of the rate change, it said.