THE AMOUNT OF money people have to pay in charges when they have a private pension is a ‘real concern’, according to one expert.
John Martin, who was behind the major OECD study published yesterday into Ireland’s pensions timebomb, said many people don’t realise just how much pension charges can mount up.
He said that charges which may seem small when people first sign up can end up making a ‘huge difference’ to the final pension pot.
Martin suggested that pension companies should have to send letters out to people with private pensions on a regular basis showing them exactly how much they’re paying in fees and charges.
“This is a real concern about the charges,” he told a press conference in Dublin yesterday.
“If Ireland is going to go down the route of auto-enrollment or whatever, then I think a very important complement to that has to be mailing out to every holder of a private pension a regular statement of the balance in their account, what are the charges, what are the management fees”.
Martin said that people would be more likely to take action if they were regularly faced with the actual amount of money in their pension fund.
He told the conference:
I can assure you, looking at international experience, when you start receiving these envelopes telling you your account… has gone up or down by such-and-such and you pay these [amount of] charges, you really start asking some difficult questions.
And you also see that it is your money, your pot, and you start getting worried about it.
He said getting regular letters would make people take more of an interest in their pensions, especially as they start approaching retirement. “And then they are going to pose some very hard questions to their pension fund managers, and that’s all to the good,” he said.
Martin also suggested that it would make sense for Ireland to increase the pension age beyond 68 as people are living longer.
The OECD report into Ireland’s pensions contained a number of major recommendations, including a massive overhaul of State pensions and the introduction of mandatory pension plans for people who work in the private sector.
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