Photo credit: www.seniorplanning.org
Hundreds of thousands of euro in pension money is being lost per person to various government-imposed charges and fees, according to a newly released report.
Back in 2012, a report by the Department of Social Protection found that the state charges in place on pensions added up to a little over 2% per year.
However, a new independent report entitled “The Impact of Fees on Irish Pensions” has found that this figure may be even higher.
Up to 60% of Irish pension funds are eaten up by charges and fees, says report https://t.co/tkFk4DUw1j
— Irish Examiner (@irishexaminer) April 19, 2021
These latest findings are in keeping with analysis by the Organisation of Economic Cooperation and Development (OECD), which found that for every 0.25% charge on pensions there is a 4-5% decrease in a person’s overall pension by the time of their retirement.
If accurate, this means that an average person loses 35-45% of their pension to these fees, which adds up to hundreds of thousands of euros over their lifetime.
At the upper end of the scale, some people may have lost as much as 60% of their total pension purely from annual fees of as little as 3%.
Labour Party Finance spokesperson Ged Nash speaking to the Irish Examiner said that this report reveals “how ordinary people are paying extraordinary sums of money from the pension pot they’ve worked hard to fill over time.”
“When a young person starting out in their career signs up to a pension provider, fees of 2% or 3% sounds small at the time, but what many don’t realise is that these fees are applied every year to the entire pension pot, which builds over time, and ends up being an eye-watering sum of money,” Nash said.
“What this also means is that the pensions industry is actually eating up a huge chunk of the tax relief available for pension contributions in fees. The State is effectively subsidising the pensions industry to a huge degree.
“The first step that needs to be taken is that the pensions industry needs to come clean with its customers about how much their fees are costing them…The enormous sums of money involved here mean that this issue needs urgent attention.
The labour spokesperson told the Examiner that he would be writing to Fine Gael Social Protection Minister Heather Humphreys, as well as the Pensions Authority over the issue.