Getting people to care about the investing fees they pay has been one of the most successful achievements in the personal finance field.
But there is still work to do. Too much money sits today in high-fee investing products that do not justify the cost. The consulting firm Mercer Canada has come up with a fresh take on how to pry some of this money loose and then direct it into more cost-efficient options.
Mercer says in its latest Retirement Readiness Barometer that paying typical investing fees can result in having to work years longer to achieve a financially secure retirement, and increase the risk of running out of money after you exit the work force. If that doesn’t get people to review the fees on their retirement investments, nothing will.
The aim of the report is to encourage the adoption of defined-contribution pension plans in the workplace – Mercer is a player in helping companies manage these plans. Less burdensome for employers than defined-benefit pensions and their promise to retirees of cash for life, DC plans still offer some huge advantages in retirement saving. One is that employers typically match worker contributions, while another is that the investment funds used in DC plans are comparatively cheap for investors.
But there’s a broader message from the report for all retirement savers, whether they have pensions at work or not. “I think you can kind of draw your own conclusion that fees matter, no matter what,” said Jillian Kennedy, a partner in Mercer’s wealth business who is responsible for the DC pension business and financial wellness.
Mercer used a cost of 0.6 per cent for the investment funds available in DC plans – that’s the median fee level in Canada for this type of retirement savings vehicle. In contrast, the median fee for balanced mutual funds and other retail investment products comes in at 1.9 per cent.
Comparing the effect of these fees on retirement was done using the example of someone who starts contributions of 6 per cent of gross pay to a DC pension plan at age 25, with an additional 6 per cent from the employer. The money goes into a target date fund, which is a balanced portfolio that automatically gets more conservative as you age. Annual returns were estimated at about 6.2 per cent before fees pre-retirement and 4.9 per cent afterward.
In this example, the employee’s goal is to have 70 per cent of their working income when retired based on pension benefits plus the Canada Pension Plan and Old Age Security. Employment income is assumed to be roughly $100,000 in today’s dollars prior to retirement.
To reach this level of savings, someone paying fees of 1.9 per cent instead of 0.6 per cent would have to work four extra years. The study goes on to show how much longer your money lasts in retirement when you pay a low fee. Investing at 0.6 per cent both pre- and post-retirement would give you an average 12 years of additional income over someone who paid 1.9 per cent both while working and after retirement. Retirement at age 65 is assumed here.
One of the ways we can tell that people are more fee-conscious is the steady rise in popularity of exchange-traded funds, which are an ultra-cheap way to invest for retirement and other goals. Particularly important are asset-allocation ETFs, a fully diversified portfolio of stocks and bonds packaged in a single cheap-to-own fund.
The cost of owning asset-allocation ETFs as measured by the management expense ratio starts at 0.2 per cent. There may be additional cost in the form of stock-trading commissions to buy and sell these products, but there are a growing number of commission-free brokers to choose from.
Why participate in a DC plan if do-it-yourself investing saves so much? Matching employer contributions are one great reason, while another is that your contributions are deducted right off your paycheque and thus not susceptible to your own subjective feelings about whether it’s an ideal time to save for retirement.
Part of the process of making investors more aware of costs has been to criticize mutual fund fees in a not entirely fair way that omits mention of something we’ll call the advice factor. The MERs for mutual funds include fees to cover the cost of service from an investment adviser. There are a bunch of ways an adviser could add value that justifies the higher fee, like coaching you to save more, spend less and to stay invested in a well-diversified portfolio rather than chasing trends.
But advisers who are primarily product sellers collect their fees while giving little or nothing back. The Mercer report shows how this extra cost can delay your retirement and increase your risk of running out of money.
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Norway Oil and Gas Firms Raise 2022 Investment – Offshore Engineer
Norway’s oil and gas companies have raised their investment forecasts for 2022 as they take advantage of high petroleum prices and tax incentives to boost activity, a national statistics office (SSB) survey showed on Friday.
The biggest business sector in Norway now expects to invest 167.2 billion Norwegian crowns ($17.57 billion) in 2022, up from a forecast of 159.5 billion crowns made in February, SSB said.
“The upward adjustment for 2022 is driven by higher estimates within the categories field development, onshore activity, and exploration, and concept studies,” the agency said in a statement.
Preliminary predictions for 2023 project investment of 130.6 billion crowns, down from 131.4 billion crowns forecast three months ago. The forecasts, however, remain subject to large revisions as more plans are prepared in coming quarters.
“New developments will significantly increase the estimate for 2023,” SSB said.
Led by state-controlled Equinor and a range of foreign and domestic companies, the Norwegian oil industry’s overall output stands at about 4 million barrels of oil equivalent per day, making the country-western Europe’s largest producer.
In 2020 Norway’s parliament approved temporary tax incentives to support oil and gas investment in the face of a crash in petroleum demand because of the pandemic.
The incentives are due to end this year and companies need to approve new projects by this deadline to benefit from them.
“It is expected that a very high number of plans for development and operation (PDOs) will be submitted to the government this year; the vast majority of them in December,” SSB said.
The expected investments will provide a boost to the economy, underpinning the Norwegian central bank’s push for higher interest rates in the time ahead, Handelsbanken wrote in a note to clients.
“All signals so far point to a solid rebound in petroleum investments in 2023-24,” the bank said.
($1 = 9.5144 Norwegian crowns)
(Reporting by Terje Solsvik/Editing by Jan Harvey and David Goodman)
Indian fintech Jar eyes $50 million investment – TechCrunch
Indian fintech Jar, which closed a $32 million financing round in February this year, is in talks to raise new funding as it looks to scale its product and expand its offerings.
The Bengaluru-headquartered startup is engaging with several investors to raise about $50 million at a $350 million valuation, according to four people familiar with the matter. Asked for comment on Wednesday, Misbah Ashraf, co-founder of Jar, said it was too early to comment.
Tiger Global, an existing backer of Jar, is positioning to lead the one-year-old startup’s Series B funding, the sources said, requesting anonymity as the details are private. Folius Ventures and Paramark are also engaging to invest in the new round, the people said.
Jar, which operates an eponymous app, is helping millions of Indians begin their investment and saving journeys. The startup has amassed over 7.5 million registered users, it disclosed to investors last month.
Nearly a billion Indians have bank accounts today, but they have never made any investment. Part of the reason is confusion, explained Nishchay Ag, co-founder and chief executive of Jar, in an earlier interview with TechCrunch. “Their world is littered with ads of different financial instruments,” he told TechCrunch in an earlier interview.
For decades, banks and mutual funds have been trying to tap India masses with their products. Despite the hundreds of millions of dollars they have sunk in to win the market, they have been able to court fewer than 30 million individuals.
“Manufacturing a product is one thing and being able to sell it is another. All these institutions are good at manufacturing. For selling, you have to be aligned with the individual’s persona, idiosyncrasies, insecurities, cognitive load and the cultural significance. That’s an art and science by itself,” he said then.
Jar is tackling this by choosing a financial instrument that is familiar to most Indians: gold. For over a century, Indians have been stashing gold in their houses, treating the yellow metal as both good investment and status symbol, he said.
To say Indians, who have a private stash worth $1.5 trillion of the precious metal, would be an understatement. For generations, Indians across the socio-economic spectrum have preferred to stash their savings — or at least a part of it — in the form of gold. In fact, such is the demand for gold in India — Indians stockpile more gold than citizens in any other country — that the South Asian nation is also one of the world’s largest importers of this precious metal.
Jar fetches a tiny amount each time a user makes a transaction. It rounds up an individual’s daily spendings and puts some money aside as investment. Users’ investments in digital gold is backed by physical gold of the same amount and they can choose to withdraw that much gold or liquidate their investments at any time.
Merck KGaA in largest single investment in manufacturing – BioPharma-Reporter.com
Merck KGaA will invest more than €440m (US$421m) to expand its membrane and filtration manufacturing capabilities at its site in Cork, Ireland. The investment will comprise of boosting membrane manufacturing at an existing facility in Carrigtwohill and the construction of an entirely new manufacturing facility.
According to the company, the investment breaks down to a €290m expansion at the Carrigtwohill facility, which is used for the immersion casting of membranes. The membranes produced at the site will support the development of novel and gene therapies, as well as being used for virus sterilization.
The remaining €150m will be spent on constructing a filtration manufacturing facility. The two expansions taken together will create more than 370 roles by the end of 2027.
Matthias Heinzel, CEO of Merck’s Life Science business, noted that the expansion made in Cork is the biggest single location investment in the history of the division, adding that “Ireland is central to our strategy to drive long-term growth.”
Last year, the company expanded its Carrigtwohill facility with a €36m investment to meet demand for lateral flow membrane, which had soared from the impact of COVID-19. The funds were put towards a second lateral flow membrane manufacturing product line, creating 50 jobs and doubling the capacity for the product.
Merck’s investments are part of an overall strategy to expand its business and group sales, with a stated aim of increasing sales to €25bn by 2025. In order to do so, the company has stated that it plans to increase capital expenditure “significantly compared with the period from 2016 to 2020.”
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