Irish Labour Party calls for more transparent pension fees

The Labour Party in Ireland has called for more transparent pension fees and plans to draw up legislation that would force pension providers to be more transparent.

The call follows independent analysis conducted on the scale of pension fees in Ireland, and the lack of transparency. The report found losses of hundreds of thousands of euro per person due to the pension fees.
Report shows losses of hundreds of thousands of euro per person due to pension fees.

Labour TD Ged Nash, the party’s spokesperson on finance, public expenditure and reform said: “This independent research was provided to me and it raises major questions about the scale of pensions fees in Ireland, and it also raises major questions about the complete lack of transparency about those fees. The findings of this report are consistent with research from the OECD, which states that every 0.25 per cent in pension fees leads to a 4 per cent to 5 per cent decrease in a person’s pension pot at retirement.”

He said that as transparency is so little in Ireland, it is difficult to say with certainty what the average fees are in the country. A 2012 government report found the average was at least 2.18 per cent.

“That means on average 35-45 per cent of peoples’ private pensions are going up in smoke due to these pension fees. We’re talking about hundreds of thousands of euro per person over the lifetime of the investment,” Nash said.

“This report shows 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 per cent or 3 per cent 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.”

The case study in the report shows the difference between somebody paying 3 per cent in fees, and 1 per cent in fees, can be hundreds of thousands of euro, Nash stated.

“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.”

Nash also raised the issue of a lack of access in Ireland to low-cost passively managed pension funds, which charge a fraction of the amount of higher cost funds. These funds are widely available in the UK and the US, but are not widely available in Ireland, he said.

“The pensions industry has questions to answer here, as does the government, and the Pensions Authority, but the first thing that needs to happen is that the pensions industry in Ireland needs to become transparent, and be legally obliged to give much better information to its customers on the impact which fees and charges are having on their pension investment,” he said.

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