The Report on Pension Charges in Ireland 2012 was compiled by the Department of Social Protection, with assistance from the Pensions Board and other parties. The report looks at the impact of disclosed and hidden charges on retirement savings and it also assesses whether charges are reasonable and transparent in how funds are being managed.
The findings of the report were illustrated by way of the following example:
An individual aged 35, saves €250 per month towards a pension for 30 years. The report estimates that contributions at this level will create a retirement fund of about €200,000, which in return would pay a pension of about €10,000 a year. Where an average charge of 2.18% per annum is then applied to the fund, the final fund is reduced by 31% (€62,000). This results in a significantly lower pension of €6,900 per annum.
Minister for Social Protection Joan Burton has commented that many schemes and individuals are clearly paying more than necessary in pension charges. The research particularly points to small occupational schemes and individual pension policies incurring high costs. However, poor investment performance and a higher cost of annuities are also affecting defined benefit schemes (which pay a set amount of salary on retirement based on service).
The study itself, having received a lot of media attention, has improved awareness of pension charges and their impact on pension funds amongst the general public. The report also recommends improving awareness of the importance of transparency, including increased compliance with regulations under the Consumer Protection Code. The Department has published the report online and has opened a three-month period for comment and submissions.