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MAY 29, 2023

What are investment fees & how do they impact savings?

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Did you know that PEPP’s low investment fees are a key benefit to you?

The reason: the less you pay in fees, the more money you’ll have in your PEPP account to retire. 

Here’s a snapshot of what you need to know about investment fees. 

What is a management expense ratio or MER? 

A MER measures the total cost to manage the assets of an investment fund for the year. The ratio, shown as a percentage, is a standard financial services fee. 

All investment funds have fees, which can vary widely. The expense ratio (ER) for each PEPP fund is below one per cent, as shown below. 

PEPP’s Expense Ratios

Expense ratios are as of March 31, 2022. The expense ratio for the PEPP Steps Fund depends on your current step since there are 13 steps.

  • 0.78% Accelerated Growth Fund
  • 0.73% Growth Fund
  • 0.65% Balanced Fund
  • 0.58% Moderate Fund
  • 0.47% Conservative Fund
  • 0.47% to 0.78% PEPP Steps Fund
  • 0.22% Bond Fund
  • 0.16% Money Market Fund

Various Canadian personal finance websites suggest that the average mutual fund MER is about two per cent. This means that if you have $100,000 in a fund, you’re paying about $2,000 in fees annually! And retail mutual funds may have other fees too.

In general, lower MERs are better as they result in higher net returns.

Like MERs, PEPP’s ERs are deducted from the fund’s assets. These fees cover the actual costs to operate the Plan and are not used to generate a profit. 

All investment funds incur an administration fee. As well, each fund has fees based on the asset mix, as some investments cost more to manage than others. 

Finding a fund’s ER or MER

In the About the Fund section on PEPP’s website, you’ll find a Fund Performance page for each fund. The Overview section shows the fund’s ER. However, if you want more details on a PEPP fund, view the Fund Fact Sheet for your specific fund. 

To find the MER for any mutual fund or Exchange Traded Fund (ETF), review a fund’s “Fund Facts” or prospectus. 

While fees are not the only factor to consider when choosing an investment fund, it’s helpful when comparing PEPP funds to non-PEPP funds. The more you know, the better you can manage your money.