|
|
A primary objective of the research is to undertake a fact‐finding exercise and to provide an insight into the breakdown of charges and costs relating to pension provision in Ireland with the goal of enhancing the understanding of the impact of charges levied on occupational pension scheme members and individual policy-holders. The research work was designed to obtain comprehensive and detailed information on all types of costs across the range of pension scheme types. The scope of the research focused on costs arising during the pension saving cycle from initial setup through the accumulation phase, up to and including the point of retirement.
While the process of saving for a pension cannot be cost free due to administration and management requirements, the charges incurred serve to reduce the level of income which individuals receive in retirement. In addition to gathering information on the level and application of pension charges, the report has sought to provide visibility on the financial impact of these charges. This is important, as evidence would suggest the impact of pension charges is not necessarily readily understood by the saver.
Pension costs are expressed as either ad valorem costs (i.e. charges which are levied on funds invested and expressed as a percentage of the fund under management), fixed costs (such as regular fees, of a certain amount every month) or as contribution charges (where a certain percentage of each pension contribution made is deducted as a pension charge). This can mean that the monetary impact of each of these charges individually, and the cumulative impact of the charges overall in monetary terms, can be relatively difficult to identify and understand. Potentially adding to this challenge is the fact that pension savings are by their nature made over long periods of time, meaning that the impact of apparently smaller charges can be amplified over time.