An accountant approached us recently and asked us to take a look at a pension a client of his had set up in the early 90’s.
Although he had been contributing regularly for nearly 20 years, the value seemed quite low and now that he was approaching 50 he was getting concerned.
On greater inspection the reasons for poor returns were very clear and quite shocking.
- Management charges – The management charges of the fund were 4.35% per annum, which meant that the total fund had to grow by at least that amount per annum for it to remain positive and that was not taking into account the recent government levy of 0.6%.
- Allocation rate – For every €100 of his premium only €91 was being actually been invested for him and the other €9 was going in charges
- Fund choice – The funds that the money were invested in were totally unsuitable for this clients profile. These risky funds may have suited his profile in his early twenties but now he was approaching middle age they were totally unsuitable.
The appalling thing from the client’s point of view was that for all these fees and charges the life company was taking he had not received one phone call from them to review in the nearly 20 years it had been in place.
Luckily for him he realised that he wasn’t achieving his retirement goals and is young enough to make the necessary changes now.
New Solution => New Savings
He has now switched to a different provider with a far more competitive allocation rate and management charge and more importantly is aware of his strategy and has committed to regular reviews to make sure they will meet his expectations.
We estimate that even allowing for similar growth rates he will save over €75,000 in management charges alone over the term of the pension.
> Calculate how much you can save on our Pensions page here
