Retirement funds – an expensive investment
When it comes to pension funds, costs and fees play an important role because these have a significant influence on returns. comparis.ch explains and provides the most important tips.
iStock.com/Foryou13
3a pension funds are expensive. This fact becomes apparent at the latest when costs and fees are discussed. For this reason, it is not uncommon for savers to have to deal with a large number of costs, which significantly reduces their returns. comparis.ch has taken a close look at pension funds and their fees, and has summarized the most important points for you.
Hidden costs are not uncommon when it comes to pension funds. In addition to the total expense ratio (TER) of the fund, there may be additional fees such as transaction costs and occasionally custodial or issuance fees. This can lead to large differences compared to the TER. In the long term, fees have a significant impact on savings. It’s worth taking a closer look and finding out.
Pension funds – active versus passive
With actively managed pension funds, a fund manager or a team of experts controls investment decisions. Passive products, on the other hand, simply represent stock market and capital market indices. Most Swiss pension funds are actively managed, although passive fund solutions are much cheaper. What is interesting is that actively managed funds do not perform significantly better than indexed ones. However, since banking institutions with passive funds earn less, these products are accordingly advertised less than active ones.
Fees, fees – and more fees
Sometimes a strikingly attractive total expense ratio (TER) is compensated by custodial or transaction fees – which means the 3a product is not as good an investment as it seems at first glance. High transaction fees only become an issue when it comes to buying or selling the funds; for example, when switching to a fund strategy with a higher or lower equity component or a new pension product. This means that if you want to invest cheaply, you should not be convinced by the TER alone, but find out in advance about possible custodial fees or transaction costs.
Summary
If you want to invest in fund solutions, you should know and consider the following:
Especially in the past, retirement funds promised higher returns than retirement accounts. However, there are no guarantees. There might be predictions about how the investment market will develop in the future, but nothing is guaranteed. Funds are riskier than savings accounts and can lose value in bad financial years.
In the long term, additional costs and fees can have a significant impact on the capital accrued. Most Swiss pension funds have very expensive fees. Over time, they are the biggest eroders of investment returns. It is worth paying attention to the TER as well as other possible fees and additional costs.
Savvy savers who do their research and check their account costs carefully and regularly will clearly be at a distinct advantage. Compare multiple products before deciding on a fund solution. Your bank advisor will only recommend products sold by their own establishment.
When it comes to pension funds, there is a variety of different products. Those who are not well-versed in the stock market and do not feel comfortable with such investments should refrain from a fund solution.