Jim Murray, Chairman, speaks about consumers and competition at the IAPF Benefits Conference
6 October 2016: Consumers need more and better information about charges, costs, and choices when investing their pensions savings for retirement, according to Jim Murray, Chairman of the Pensions Council, speaking at a conference of the Irish Association of Pension Funds in Dublin today.
According to a study of Approved Retirement Funds (ARFs) carried out by the Pensions Council, a pensioner investing a pension pot of €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, and these charges were the subject of the Council’s study.)
The study was confined to ARFs, which are sold through an intermediary, such as a broker, and found that the intermediary’s charges may be even higher than the insurer’s charges, reducing further the final outcome of the investment. In the current period of low yields, these combined charges are likely to lead to negative returns on certain funds or investments.
Furthermore, according to Mr Murray the market for ARFs seems to be have developed more as a market for the intermediary than for the final consumer. To redress the balance, information about all relevant charges should be publicly available and updated regularly, together with a closer scrutiny of how exactly, when and in what form individual consumers are informed about such charges in practical cases.
Note to Editors
The Pensions Council (An Chomhairle Pinsean) was set up under 26B of the Pensions Act, 1990 to advise the Minister on matters relating to policy on pensions. The Council is to be an advocate for the consumer interest and help to ensure that the system has a stronger consumer focus. At the inaugural meeting of the Council in March 2015, the Minister for Social Protection asked the Council to give special attention to charges and to gender issues.