• March 7, 2023

Are pension funds at the end

Are pension funds at the end?

Interest rates are currently historically low. Savers are desperately looking for lucrative investment opportunities. But to find this is not so simple. Above all, because wisdom from the past is no longer any good today.

In the past, when you could still earn good interest on your money, there was a stock market saying: Put your money in an equity fund with an international focus and in a German bond fund, and you’ll always be on the right side. Shares promise yield and pensions limit the losses. Everything is easy and you don’t have to worry about anything, the fund managers do it for you.

But that was once the case. Today in times of low interest rates, a pension fund is a conceivably bad form of investment, because a fund costs savers real money. Savers only make a profit if the fund’s returns are higher than its costs. With low interest rates, however, this calculation no longer works for investors.

Fund costs

The purchase of a fund, including a bond fund, initially costs bank fees. The issue surcharge, as these fees are correctly called, are always due. Just as the remuneration for fund managers. This receives a regular management fee and in addition a success fee. However, the fund manager does not participate in losses, the investor must bear them alone.
In addition, many banks also receive a portfolio commission from the fund manager as long as the savers leave their money in the fund.

All these items add up to a handsome sum in the end, which reduces investors’ returns. A look at the costs is therefore indispensable in times of meager interest rates. And so it must be recognized that interest rates of 1.5 percent, which Italy, for example, is paying on its bonds at the moment, will never be enough to cover the fund costs and also generate a return on investment. Alone the management fee amounts already up to 1 per cent.

Pension funds done

This means that the idea of investing in bond funds is now a thing of the past. Savers would only wantonly decimate their money by investing in such funds. Instead, there are other savings options that cost as little money as possible.

Euro banknotes


Accordingly, better than pension funds are a call money account, although there are hardly any lucrative offers for this anymore, or a time deposit account. Fixed deposits are currently yielding less than 2 percent interest, but due to the low costs, there is still something left for the saver in the end. Even if this is extremely meager compared to earlier times.

A part of his money should therefore better put into stock index funds. These promise decent returns and incur only low costs. If you want to try to beat the index with individual stocks, which from experience will be very difficult to impossible, you should first invest risk-free with a Trading Demo Account Gaining experience.