Question:
The way I understand it, the capital in your preservation fund simply lies there to compound after you transfer it, say, from your pension fund. If so, why are the fees you pay for preservation fund administration the same as for your pension fund?
Answer:
Elzette,
Your point is correct: administering a pension fund is far more onerous than administering a pension preservation fund, as the former receives monthly contributions, and the latter only single contributions. 10X therefore does not levy an administration charge on its preservation fund, only on pension/provident funds. Our preservation fund investors only pay the investment management fee, based on our sliding fee scale (maximum 0.9% pa ex VAT).
Other funds may well charge an additional admin fee, possibly because they give you the option to switch your investments from one fund manager/portfolio to another. This results in administrative work and costs. The problem is that you pay this admin charge, irrespective of whether you actually switch your funds on a regular basis or not. Most investors don’t, which means they pay for a service they do not use.
If this applies to you, then you can consider switching your preservation fund to a low cost service provider who does not charge administration fees. But before making a decision, consider and compare all the costs you pay on your preservation fund, as well any costs you may incur on the transfer (exit fees, advice fees). You also need to ensure that you understand your new manager’s investment strategy, and that the asset allocation of the fund you choose is appropriate for your needs.
