The Effect of Fees


A 1% difference in fees can sound tiny, but over the 40-year life of an investment it can shave a third off the final sum.  That means a dramatic change in lifestyle for someone who has worked hard to save for their future.  Furthermore, they may never know what was lost and by the time they realise it will be too late to do anything about it.

This problem is not new but it has been made more severe in recent years by low interest rates.

Until recently small variations would have been masked by high returns but today with interest rates remaining so low for so long, even a small charge is a large proportion of any return. 

It is a fact that fewer people are saving for their future and as they retire and realise their efforts to save have left them without enough to continue the lifestyle they expected, there is a danger more will see saving as pointless.

There are two specific areas to watch out for regarding fees.

  1. The Annual Management Charges taken by a pension or investment provider. This will invariably be expressed as a percentage of the fund but that percentage can vary significantly.


  2. The Adviser Fee taken by the Financial Adviser. Many firms still take a percentage of the fund and this can seriously reduce the investment over a period of time. A flat or fixed fee taken from the fund will reflect more accurately the work being done by the Adviser and will also have less of an effect on the growth of the fund.


John BaxterComment