At the most basic level, an expense ratio affects how much money you get back after all costs to run the pension plan are calculated and deducted.
The operational costs of a fund vary depending on its size, investment category and investment strategy and usually include costs related to administration, compliance, management, record-keeping, transaction fees, etc.
However, the size of the fund does not necessarily have the effect on its expense ratio that you might expect: a fund with a small amount of assets might have a higher expense ratio because it has a smaller pool of assets to meet its expenses.
International funds will also usually have a higher expense ratio because they invest in countries all over the world and therefore have higher operational costs associated with this diversity.
The expense ratio is represented as a percentage and is determined by dividing the total fund costs by the average total fund assets. It is calculated annually and reported in the financial statements for the plan. Chamber Pension Plan’s most recent audited expense ratio can also be found on our quarterly Fund Fact Sheets.
It’s important to pay attention to the expense ratio charged because it directly affects the value of your investment by reducing your total return. A higher expense ratio usually means a lower return for your investment. For example, if a fund returned 5% for the year and the expense ratio of that fund was 1%, your actual return would be 4%.
It’s important to note that comparing the expense ratio of one fund against another is not always an ‘apples to apples’ comparison. While one fund may have a higher expense ratio, it could be a better performing fund or have other factors that could still lead to a higher return on your investment over the fund with a lower expense ratio.
Be sure to check out our blog Understanding your Pension Investments to learn more about how pension providers such as Chamber Pension Plan leverage the expertise of established investment advisers so you don’t have to worry about mastering a variety of investment strategies on your own.
The Chamber Pension Plan has a record low all-in expense ratio of 0.72% for the financial year ended 30 June 2020. This means lowered expenses and increased returns, so you can have more money in your pension at retirement.
The Chamber Pension Plan is a not-for-profit entity that does not charge monthly account maintenance fees or fees to join or leave the Plan. There are no hidden fees, and the performance of the Plan is reported after all fees. The only expenses are related to the management and administration of the Plan.