While some Canadians have company pension plans, others save money for retirement in tax-sheltered accounts (RRSPs). The problem is that they often invest that money in mutual funds and the average fee to manage those funds is among the highest in the world.
Fees could eat up 40 per cent of retirement savings
These high fees could make Canadians delay their retirement by as much as 11 years, says a report from The Canadian Centre for Policy Alternatives. Or, the think-tank reports, it could leave them with 40 per cent less money for their retirement.
The average Canadian mutual fund charged 2.1 per cent in annual fees last year, regardless of whether the investment made or lost money, according to the report. It may not sound like much, but it does add up. And the biggest single asset in most Canadians’ RRSPs is mutual funds, which are groups of stocks or bonds bundled together and managed by a private corporation
Private fund managers paid much more
The private fund managers do about the same job and do managers of workplace pension funds, but at a much higher cost. The average workplace pension plan withdrew only 0.38 per cent of all assets to pay its managers last year.
RRSPs have grown in importance has been accompanied by a decline in workplace pensions. In 1997, about 43 per cent of workers were covered by some sort of pension plan. Today, the figure has fallen to 27 per cent.
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