What’s a MER and Why Do I Care?

Mar 31, 2014

Most investors understand the notion of an investment management fee (IMF) associated with their investments in pension plans and retirement savings plans. The IMF is how the fund manager gets paid for managing the fund, and the fee will often include the investment firm’s operating expenses and administration costs too.  But ask plan members, or even some plan sponsors what the MER is for their plan and you will often get a quizzical shrug in return.

The MER, or management expense ratio associated with your retirement savings plan, is an important consideration when selecting both the type of investment fund and the provider or administrator of your retirement savings program.  While the IMF is a major component of the MER associated with your plan, additional fees and costs relating to recordkeeping, administrative support and commissions will increase the IMF you see published for a fund to something higher. The impact on the investment return of the fund is ultimately impacted as those additional expenses can turn the MER of your fund or plan into an anchor, dragging your returns down considerably.

So why is it important for you to know what the MER is of your plan? In simple terms, the higher the MER the lower your return.  For group plans, the return you see published by the fund companies and service providers like insurance companies, is the gross return before fees. You might think you earned 12% on that Canadian Equity fund you so confidently selected when you enrolled onto your pension plan last year. In reality, with a 2.25% fee, you only earned 9.75% and that’s the number that would be reflected on your member statement.

Fees are an important consideration in the design of retirement savings plans. As a plan sponsor, you need to know what they are for your plan, and as a plan member you need to care enough to ask.

- See more at: http://www.trggroup.com/index.php/2014/03/31/whats-a-mer-and-why-do-i-care/#sthash.6KJPBdTb.dpuf
blog rss subscribe button

GET TO KNOW GREG

Jump to:

Place content block here for staff contact info
Place content block here for social media links

PREVIOUS BLOG

Movember – For Men’s Health

By Greg Pallone on November 5, 2013

NEXT BLOG

Reforming Pension Reform

By Greg Pallone on June 30, 2014

sectionHeaderImg-Blue 

GREG'S LATEST BLOG POSTS

Place content block here. Add accent and heading in editor.

5 Things You Don’t Know About Retirement

By Greg Pallone on January 20, 2015

Reforming Pension Reform

By Greg Pallone on June 30, 2014

What’s a MER and Why Do I Care?

By Greg Pallone on March 31, 2014

Movember – For Men’s Health

By Greg Pallone on November 5, 2013

Re-thinking Retirement – Part II

By Greg Pallone on September 10, 2013

Re-thinking Retirement (Part 1)

By Greg Pallone on July 15, 2013

CAP Guidelines Do Matter

By Greg Pallone on March 12, 2012

Benefits, pension plans face sustainability issues

By Greg Pallone on January 21, 2012

GET IN TOUCH WITH GREG

Learn how Greg can help with your group benefits.

Phone 604.714.4442, email gpallone@trggroup.com or send a message.

Message for Greg