A report on pensions has found that fees and charges are so high that over time they are wiping out the tax relief given to pension savers by the State.
The findings have led the Labour Party to draw up legislation that would force pension providers to be more transparent about charges.
Labour finance spokesman Ged Nash said the findings of the report are consistent with research from the OECD.
This stated that every 0.25% in pension fees leads to a 4% to 5% decrease in a person’s pension pot at retirement.
“With so little transparency on pension fees in Ireland, it is difficult to say with certainty what the average fees are here, but a 2012 government report found the average was at least 2.18%,” Mr Nash said.
“That means on average 35-45% of peoples’ private pensions are going up in smoke due to these pension fees. We’re talking about hundreds of thousands of euro per person over the lifetime of the investment,” he added.
Ged Nash said that ordinary people are paying extraordinary sums of money from the pension pot they have worked hard to fill over time.
“When a young person starting out in their career signs up to a pension provider, fees of 2% or 3% sounds small at the time, but what many don’t realise is that these fees are applied every year to the entire pension pot, which builds over time, and ends up being an eye watering sum of money,” Mr Nash said.
“What this also means is that the pensions industry is actually eating up a huge chunk of the tax relief available for pension contributions in fees. The State is effectively subsidising the pensions industry to a huge degree,” he added.
Mr Nash said the pensions industry has questions to answer here, as does the Government, and the Pensions Authority.
“But the first thing that needs to happen is that the pensions industry in Ireland needs to become transparent, and be legally obliged to give much better information to its customers on the impact which fees and charges are having on their pension investment,” he added.