The FT ha an excellent article that anyone with an interest in pensions should read this morning. The argument is clear from the title, which is ‘Fees are a scourge on pension funds‘.
The article makes three things clear. The first is that fees in most pension funds are much higher than for direct investing, but the returns aren’t necessarily any better.
The second is that getting data on this issue is nigh on impossible, but a new report is trying to put that right.
The third is that in the UK the average rate of return on pension fund investment between 2000 and 2013 was minus 0.7% (in real terms) despite the fact that these funds in the UK managed more money than UK GDP.
And there are no excuses for this rate of return: by no means all countries delivered such poor returns. Denmark managed 3.8% positive returns over the same period and we live in an era of globalised markets.
As the article mentions, this dismally failing activity receives a subsidy of £50 billion a year from the UK taxpayer and still cannot produce a return. For everyone, and especially those without a public sector pension, this is a matter of concern.