"Two things in particular concern me re pension proposals.
Given that it is very foolish for all not to make pension provisions, pension providers have a captive consumer. This consumer needs protection from the following which is quite common.
For mathematical simplicity say I have a pension fund of €100,000.
The provider managing this fund imposes an annual charge of say 1.5% of the total fund.
Consider a year in which the fund has grown by 3%. Total Value €103,000.
Management charge @ 1.5% €1545 which is over 50% of the growth!
Consider a year in which the fund falls by 3%. Total value € 97,000.
Management charge @ 1.5% €1455 which is only €90 less than before.
Given that it is very foolish for all not to make pension provisions, pension providers have a captive consumer. This consumer needs protection from the following which is quite common.
For mathematical simplicity say I have a pension fund of €100,000.
The provider managing this fund imposes an annual charge of say 1.5% of the total fund.
Consider a year in which the fund has grown by 3%. Total Value €103,000.
Management charge @ 1.5% €1545 which is over 50% of the growth!
Consider a year in which the fund falls by 3%. Total value € 97,000.
Management charge @ 1.5% €1455 which is only €90 less than before.
- Why should the provider be rewarded for losing money?
- With only €90 of a difference there is little incentive for the provider to manage more efficiently.
- The link between management charge and total fund should be broken.
- If the charge on Standard PRSAs can be prescribed why not the same here?"