The tenth consecutive Irish Times Personal Pension Survey shows what happens to an individual's investment in their pension fund and how significantly the value of their fund can vary depending on the investment performance of the life company with which it is invested, the type of fund chosen and the company's charges.
The results, based on the maturity values of the investments, look at the returns achieved for investors after product charges are deducted.
They show that a pension fund investor who opted for the with-profit Caledonian Life fund 20 years ago would have £81,741 (€103,800) more in his pension fund at maturity than an investor who opted for the Irish Life unit-linked fund at that time.
The figures show a maturity value gap of £49,345 between the value of the best and worst performing unit-linked personal pension plans taken out on January 1st 1981 and maturing on January 1st 2001.
This means an investor in the best-performing fund will have almost £50,000 more at maturity than an investor putting the same annual amount into the worst fund. The maturity value gap between the best and the worst with-profit funds taken out over 20 years was higher, at £59,290.
Over 15 years, the maturity value gap was £15,120 on unit-linked funds and £20,466 on with-profit funds. Over 10 years, the gap was £13,172 on unit linked funds and £7,547 on with-profit funds.
The survey looked at the maturity values of mixed funds - unit-linked managed funds and with-profit funds. Each type of fund contains shares (equities), properties, Government bonds and cash. The difference is that with-profit funds lock in some gains each year based on the guaranteed value of the fund at maturity, while the value of unit-linked funds at any time is based on the market value of the assets in the fund. Thus, with-profit funds smooth out market volatility and unit-linked funds suffer more when markets are weak.
Comparing maturity values of unit-linked and with-profit funds over 15 years, the gap was £32,808. Standard Life's with-profit fund produced £110,866 against £78,058 from Hibernian Life's unit-linked fund.
Over 10 years the gap was £14,413, with the Eagle Star unit-linked fund producing £51,573 against £37,160 from the Royal Liver with-profit fund.
The survey found that the two fund types outperformed inflation by between 8.93 per cent and 10.83 per cent per annum. Inflation, as measured by the Consumer Price Index, has averaged 2.68 per cent and 2.78 per cent per annum since 1991 and 1986 respectively, and 4.92 per cent per annum since 1981.
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