Pension fees are a feature of paying for the professional services that manage pension funds. It can be a workplace pension or one you have set up yourself, like a PRSA.
Regardless of which option you are using, the fees and charges are secondary. Forget about them. They are an afterthought to what your real objective should be, financial security in retirement.
Ireland offers an extremely attractive tax incentive to contribute into a pension. For every €1,000 placed into a pension means that €1,000 is removed from taxable income. This is called tax relief.
When your money is put into a pension, it is placed into various investments such as equities, bonds and money markets. In other words, it is invested. And generally, you will have some say over the investment choices.
What matters most is the total rate of growth over time. Here, you need to understand that investment markets go up as well as down. But over time, provided the investment managers are doing their job, your pension fund should experience growth in line with general market conditions.
The management fees are secondary if you are benefiting from general growth.
Here in Ireland, any investment growth within a pension fund is not taxed whereas investment growth outside of pensions can be taxed at between 33% and 41%, depending on the type of investment.
There are so many financial benefits that come from pension contributions, fees should not be a reason to not sign up!
Frank Conway is a Qualified Financial Adviser and Founder of MoneyWhizz. The financial wellbeing initiative.
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