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Fees & charges

Impact of charges

Fees and charges can have a significant impact on the value of a pension fund over a long period of time.

In defined benefit occupational pension schemes the fees and charges associated with the management and administration of the pension scheme are generally paid for by the employer.

For pension arrangements such as defined contribution schemes and individual pension arrangements (including additional voluntary contributions) the fees and charges are generally taken directly from the member's pension account. The value of the pension account at retirement is reduced by the fees and charges deducted over the years.

The following table shows the pension fund that would be built up over a 20 year period based on contributions of €300 per month, with an allowance for investment returns of 6% per annum.

 
 Fund after 20 yearsImpact of charges on fund value (% difference relative to fund with no charges)
No charges€136,700-
Charge of €10 per member per month€132,1003.30%
Charge of 5% on contributions€129,9005.00%
Annual management charge of 1% of the fund€122,20010.60%

In particular, it should be noted that an apparently small annual percentage charge can translate into a high cost impact over time. In our example, a 1% annual management charge has the impact of reducing the fund built up over 20 years by over 10%.

For DC schemes and PRSAs you should be notified of the effect of charges on your pension each time you receive a Statement of Reasonable Projection.