The entities that manage pension savings charge management fees from savers. Management fees are divided into two:
- Management fees from monthly deposits – “management fees from the premium”.
- Management fees from the entire amount accumulated by the saver – “management fees from the accrual”.
Different pension instruments charge different management fees:
- In pension funds, management fees are limited to 0.5% of the accrual and 6% of the premium.
- In provident funds, management fees are limited to 1.05% of the accrual (recently the provident funds have also begun to collect management fees from the premium).
- In managers’ insurance, there is a complex mechanism of high management fees collected from the premium and low management fees collected from the accrual at the outset. Over the years, management fees collected from the premium decrease, and those collected from accrual increase.
Overall, in pension funds, management fees are the cheapest, and in managers’ insurance, they are the highest.
Over the years, management fees accumulate to a very high amount. When haggling over management fees, it is important to pay attention to a few things:
Management fees from accrual Even if it is only 0.1% of the accrual, cumulatively, from the perspective of savings over decades, this is a high amount.
- The higher the accrual, the greater the management fees charged from it. Therefore, the element that is important to bargain after several years of savings is the management fee from the accrual.
- If your savings are spread across funds and funds (if you’ve moved jobs), it’s harder to negotiate management fees. Consolidate the fragments of savings so you’ll have an easier time keeping track of them.
- When you are offered a pension product, find out whether you pay a higher than average management fee in the same fund or fund. It is important not to look at the industry average, but at the same fund or fund. You can see the data onProvident orPensionNet (you can ask the consultant or marketer to show you). If you are an existing customer, this can also be seen in the annual report of the HMO or fund. Don’t pay more than the average checkout. This is an upper limit. It is worth striving for even less.
- If you’re offered a discount, find out how long it is, and make sure to bargain again immediately at the end of the period.
- If a basic pension product is enough for you, today you can join the products directly and not through marketers. The cost of these products is lower.
- There are calculators and websites that help in haggling over management fees, use them.
- Get multiple suggestions from multiple parties. If you don’t get the price you want, switch to a cheaper pension product that suits your needs (in terms of yield, insurance, etc.).
- Check whether your workplace has pension arrangements that are accompanied by benefits in management fees, and whether these arrangements are worthwhile (in terms of yield, insurance, etc.).
Do not despair!
Bargaining over management fees is not simple because the “other side” is strong and sophisticated, but if the bargaining is done stubbornly, it will eventually bear fruit.