The Pensions Council has published a report on Approved Retirement Fund (ARF) charges. Differences in charges for the investment of pension funds can mean a gain, or loss, of thousands of Euros for individual pensioners. A pensioner investing €75,000 over ten years might have saved up to €5,440 in charges by choosing the fund with the lowest charges. For an investment of €150,000 a pensioner might have lost up to €11,700 or nearly 8% of the initial investment, by choosing the fund with the highest charges.
Typically, ARFs are set up by insurance companies, which charge investors fees at set-up and over the life of the investment. Six insurance companies account for the vast bulk of the market in Ireland and these companies were requested to provide information on their ARF products marketed through intermediaries/brokers. At one point late in 2015, the companies were asked to provide details on the Reduction in Yield (RIY) flowing from charges on their different ARFs. RIY is the difference between the potential return on investment, taking charges into account, and the notional return if there were no charges. It is a useful way of measuring the impact of different charges or expenses on an investment.
The survey results are NOT a consumer guide to the cheapest or most expensive companies or charges. The survey provides a “snapshot” of charges at one point in time and charges may change over time. Furthermore, the survey did not cover intermediary/broker charges, which may be comparable to insurer charges. However, the survey results have one important lesson for consumers and intermediaries – shop around and compare all charges before choosing a particular ARF.
The Council also points out that the kind of comparative pricing information in the Report is not normally available to consumers or their intermediaries. It would be helpful if such information were made available on an on-going basis.
The Council is grateful for the cooperation of all six companies surveyed.
The full report is available by contacting Trident Consulting or directly from the Pensions Council.