Irish report presents 'misleading view' of pension charges
IRELAND – The Irish government should not focus exclusively on lowering the absolute level of pension charges but rather seek to increase levels of transparency around management fees, the Irish Association of Pension Funds (IAPF) has said.
In a submission to the Department of Social Protection, the association also expressed its disappointment that a recent report on fees – which last year sought to highlight an average charge of 2.18% – did not focus more on the "good work" undertaken by trustees in lower-cost occupational arrangements.
At the time, the IAPF's chief executive Jerry Moriarty said the report highlighted the "worst charges possible" – a sentiment echoed in the submission, which said the government gave a "misleading view" of the state of fees in Ireland.
Discussing the headline figure cited by the report, the IAPF said: "To describe this as 'the average charge' in the summary gave a misleading view of the findings of the report, which undermines the good work being done by trustees in obtaining value for their members.
"It is clear there is considerable scope for improvement, particularly in relation to individual retail products, but this should not overshadow the more positive findings in relation to occupational pension schemes."
The association also cautioned the government against an undue focus on the level of charges, saying it was not the absolute level of fees that was important but rather the value offered.
It added that a singular focus on the level of fees was in the interest of neither members nor pension funds if a mandate's investment performance or the manager's associated service was "sub-standard".
Rather, greater transparency was key.
"Increasing the level of transparency and consistency around charges and fees will increase the ability of trustees and individuals to make better informed choices," the IAPF said.
The association also sought to address government claims that lower management fees could help reduce the impact of the 0.6% pensions levy.
"An indefinite continuation of the levy would have resulted in an approximate 10% reduction in gross retirement income of pensioners," the response said. "For large funds that can achieve extremely low charges, the levy is often a multiple of those charges."
Michael Noonan, the country's finance minister, confirmed in last December's budget that the charge would be allowed to expire in 2014 and not be renewed, as initially feared by some industry members.
However, the IAPF also agreed with the Department of Social Protection on a number of matters, backing calls for greater comparability of asset management fees and saying that disclosures should be consistent, allowing comparisons to be made "on a like for like basis".