In reality returns on pension savings are a lot lower
How much money did you put aside for your old age? More importantly, what are the returns on that piggy bank? According to BETTER FINANCE, a European consumer organization which advocates more transparency in the financial sector, the returns are much lower than assumed... after taking into account all fees, taxes and inflation. Hidden costs are the main cause.
Due to a lack of available data the periods of comparison differ somewhat. Whereas the findings of the report should therefore be taken with a grain of salt, it is the complexity of the different tax regimes for pension savings in the EU Member States that makes it extremely difficult to calculate returns after tax. Transparency and simplicity, although required by EU law, are still far-off.
The difficulty in terms of comparison due to lack of usable data is the more worrying still since regulators “do not know the real performance of the services they are supposed to monitor." The regulators are obsessed with market performance but “unfortunately market performance has little bearing on the performance of savings, and certainly not that of retirement savings. The main reason is that savers do not directly invest in stocks or bonds, but in packaged products such as investment funds and associated costs.”
As for the costs, not only do they significantly reduce returns, they are very complex, non-transparent and different form provider to provider. It comes as no surprise then that the pension and investment markets remain the most problematic sectors of all.