.35% annual fund management charge

thebourke

is .35% a lot as a fund management annual charge for a pension per year

dennyk

Depends on the type of fund (indexed vs. actively managed). It'd be on the high side for an index fund (you'd usually see something around .15% or so for true index funds), but pretty decent for an actively managed fund, I'd say. Might not hurt to see if your pension provider has any lower-expense index funds that would be suitable for your investment strategy.

Henry Ford III

It's very low.

thebourke

Hi,
My last company is closing down its pension scheme with its current provider.
The trustees and sent me an email that i will need to transfer my funds(Current value 46k) to a different fund
It will be a managed fund with an annual charge of .35%

So i presume with an indexxed fund that you look after what funds you invest in yourself rather than the provider?

dennyk

Index funds and managed funds are both mutual funds (which are effectively collections of many different individual equities and other financial investment products), and both can be part of an overall pension portfolio you manage yourself or one that is managed for you by a pension provider.

Index funds are basically automated investment funds which invest in certain stocks or bonds based on a preconstructed set of rules. Usually they try to mirror the makeup of a certain market index, like the S&P 500 Index for US stocks, so that the fund will basically perform about the same as the index it tracks. Since the rules are predefined, these funds require little or no active management, and therefore have lower management fees.

Actively managed funds are run by fund managers who actively select particular investments in order to try to meet whatever the goal of the fund is. Since this requires more time, as the manager will be actively researching and analyzing various investments to determine which ones should be added to or removed from the fund, management fees are generally higher.

Many investors recommend index funds over actively managed funds because over the long term they tend to perform as well as or better than actively managed funds on average and they have the lower management fees as well, meaning you get a better rate of return from an index fund assuming equal performance.

ANXIOUS

dennyk wrote: »

Depends on the type of fund (indexed vs. actively managed). It'd be on the high side for an index fund (you'd usually see something around .15% or so for true index funds), but pretty decent for an actively managed fund, I'd say. Might not hurt to see if your pension provider has any lower-expense index funds that would be suitable for your investment strategy.

That's wrong, you'd very rarely see an amc as low as .15%. Generally only found in very large groups schemes of companies in the business.

dennyk

Are you talking a fund expense ratio or a pension annual fee? I was speaking only of fund expense ratios. .15-.20% is pretty normal for a broad index fund; anything more than that is really higher than it needs to be (though of course you may not have much choice with occupational pensions). The Irish Life index funds in my own occupational pension account are 0.12%-0.15%, for example. Actively managed funds will have higher expense ratios, of course.

I do believe most private pensions and PRSAs often do have higher management charges, though, since they're in it for the sweet sweet profits and there's no employer footing the bill.