Fees and charges

Every pension is different and will have different fee structures. Older pension schemes in particular may have multiple charges. It is worth checking with your pension provider what the charges are and what options you have to try and reduce them. Typical fees and charges on pensions include:

Setup fee – Some personal pension plans (PPP) have a fee for setting up the pension. The fee will be taken from your regular payments. It is typically taken for 6 months to one year, but you will need to refer to your disclosure notice document to check this.

Allocation charge or allocation rate (entry charge) – This is the percentage of your contributions that is used to buy units in a pension. For example, an allocation rate of 97% means that for every €100 you invest, €97 is used to buy units. So, in effect you pay a €3 (or 3%) charge.

Annual Management Charge/ Fund Management Charge (AMC or FMC) – These charges usually range from 0.5% to 2% and vary depending on fund you choose. Specialist funds typically have higher fees but may also promise higher returns (though returns are never guaranteed as they depend on the performance of the market).

Exit Penalties / Fund switching – These charges typically apply to lump sum investments for the first five years. If you move from one fund to another, you may have to pay an exit penalty, which decreases over the five-year period. Not all investments have exit penalties, and it depends on your contract term.

Early encashment – This is a fee you may be charged for any money you take out in the first few years. This charge is highest for withdrawals in the first year and reduces every year after that. Generally, there will be no charges after five years.

Policy Fee – Some companies charge a policy fee, which can range from €4 to €7 a month. For those paying pension contributions of €100 to €200 a month, this fee can add up, as it is in addition to any allocation and management charges.