High fees ruin your retirement
Costs have a dramatic impact on your long-term savings outcome. But this only becomes obvious once fees are seen in their proper context. The proper context is the real (after-inflation) long term investment return. A prudent return expectation for a balanced portfolio is 5%. Every 1% in fees therefore reduces your real return by 20%. More importantly, this compounds over a 40-year savings period so every 1% in fees you save increases your real retirement income by 30%!
Even government acknowledges there is a problem:
“High costs in savings products undermine the national objective of getting our people to save more.”
Pravin Gordhan, Finance Minister, 2012 Budget speech