21/06/2013
Fees destroy returns of pension programmes
P { margin-bottom: 0.08in; } The performance of pension programmes are generally subject to a very significant erosion, which is nonetheless not due to turbulence on the markets. The commissions applied by intermediaries are the number one factor causing the destruction of performance in these programmes, according to a study published on 20 June by the European federation of users of financial services, EuroFinuse.The study confirms, extends and deepens research by the OECD published last year, which found that there were negative real returns on average for pension funds. EuroFinuse extended the research to include France, which the OECD had not covered, and attempted to identify the main factors causing the destruction of value for pension programmes.In addition to fees, which are not clearly specified by pension plan holders, financial repression and taxation are other primary drivers of the destruction of value.The report further warns that simple retirement vehicles should be designed to protect the long-term buying power of the savings investor. Special prudential regulations should be put in place for all long-term pension products, to encourage investment in long-term assets such as equities, through tax breaks.
