Pension profit only 2.3% a year

Without knowing exactly how much was paid in each year it's impossible to calculate the average annual return.

Most people's pension contributions are a percentage of their salary, and their salary tends to go up a bit each year due to progression in seniority, the occasonal promotion and general pay increases, so their pension contributions go up with it. If we assume that this guy paid pension contrbutions of €3,660 in 2005 and then increased that by 5% each year, then after 10 years he would have paid in just over €46,000. If that had accumulated to €71,000 by 2024, my back-of-the envelope calculation suggests that that implies an average annual return of about 3.1%.

Which is better than 2.3% but still is, yeah, not great.

You don't say how your friend's pension fund was invested. Most pension funds offer a choice of investment options, some of which focus on providing a stable, but generally low, return, and some of which provide a more volatile, but generally higher return. People who have a horror of ever seeing their balance go down will tend to tend to go for the more stable, cautious options. In the long run they pay for this by accepting limited returns — they don't get much more than if they had put their money in the bank to earn interest.

One possible explanation for your friend's disappointing return is that his money was invested in a low-risk, low-return fund like this.

Another possiblity is that your friend's pension fund was invested in a high return, but volatile, fund, and the €71,000 valuation was made at a point just after the fund had taken a dive. Value it again in 6 or 12 months' time and it might be a very different story.

Yet a third possibility is that his returns have been kept low by high management charges imposed by the fund manager.

It's certainly worth your friend's while to investigate this; there may well be things he can do that will improve the returns he is earning. But there isn't enough information in the OP to say what those things might be.

Seen this in my own pension also. Pitiful growth. Despite stock markets being all time highs.

that's the way to go.

First Google result:

"Over the past 100 years, gold has yielded a 2.1% average annual return. Over the same period, the Dow Jones Industrial Average (DJIA), an index of the US stock market, has yielded a return of approximately 7.3%"

@xingxing1118 I think you should stop advising your friend you are misleading them at best

Just a very quick example I had a prsa that I paid 6k into in 2009 and 2010 then I bought a house and stopped it. I got 40% tax relief so this only cost me 3600. I was in my 20s at the time and I had a fairly aggressive fund.

In 2018 I decided to transfer this into my work prsa and the found it had grown to 12000 after charges. I was then charged a fee to move it into new prsa, about 3% or 360 euro

So a net cost of 3600 to me grew to 11600 in 8 to 10 years or tripled in value. Even if I take tax relief out of the equation, it doubled in value even after charges. This is somewhere in the region of 7 or 8% compounded annually.

There was nothing amazing about that fund, it was diversified and aimed to track indexes around the world and all pension providers would have had a similar fund with similar returns. But all have cautious funds that returned 3% over that time too, probably weighted heavily towards bonds rather than equities. So 3.1% is not exceptional case at all, just a low volatility fund which is a viable choice to make.

Do you know what your friends pension is invested in? Are you taking tax relief into their overall position? What age is your friend? Is he risk averse?

You can't get 40% relief on gold unless there is an approved pension fund that invests only in gold, maybe there is, maybe there isn't. Would be reckless to put everything in one commodity like that but maybe it's possible through pension.

This is why people need proper INDEPENDENT advice. You'll find you are in a very low risk fund with little exposure to equities. Fine if you are 70, but not if you are under 50.

PAY an expert who doesn't get commission from fund managers.

A pension I put €68,000 into between 1999 and 2006 has a value of almost €350,000 currently because I have someone I pay to have a full review every year of the different pensions I have. All of which have had strong growth except 2022.

Most pension providers allow you switch funds every year (and more often) with no penalties.

2011-2014 pensions levy will have eaten some of this.

With tax relief of either 20% or 40% why would you be worried about the 1% management charge?

If you contributed 10k, your fund goes up by 10k and your charges are an extra 100 euro. But you have got tax relief of either 2000 or 4000.

I understand the worry about a fund giving negative returns but even at that the tax relief insulates you against a lot of negative returns

What fund were you invested in?