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Group Retirement Solutions
The Importance of Fees on Your Retirement Savings
A small difference can make a big difference!
It’s important to understand the fees you pay in any retirement savings plan. By the time you retire, a small difference in
fees can make a big difference in the value of your savings.
Common types of fees you might pay in your retirement savings at a bank or through your investment advisor include:
Sales charges,
Fund management fees,
Account administration fees, and
Other fees, such as transaction fees.
The FutureStep™ Group Registered Retirement Savings Plan (Group RRSP) from Manulife Financial is a low cost alternative
for you, and one your employer is able to offer because you and your colleagues are bringing their savings together into
one plan.
This means the fees you pay for investing in a FutureStep Group RRSP might be different from those on individual
investments offered through a dealer or intermediary, such as an investment advisor or bank.
Keep reading to see just how much of a difference paying lower investment management
fees can make!
How can paying lower investment management fees affect my
retirement savings?
Manulife offers investment management fees (IMFs) that are typically lower than those of a similar mutual fund in which you
invest directly. To illustrate how a small difference in fund management fees can have a significant effect on your retirement
savings, take a look at the following graph. It shows two scenarios. Each scenario features an initial investment of $25,000,
with an additional $3,000 invested in each of the next 25 years. In both scenarios, investments earn an annual return of
6%. There’s a difference – one scenario assumes an IMF of only 1.75%, while the other assumes a management expense
ratio of 2.45%. The only difference between an IMF and an MER is that one term (IMFs) is used by insurance companies,
while the other term (MERs) is used by banks and mutual fund companies.
Effect of fees on your retirement savings
$250,000
$205,490
(when paying
an IMF of 1.75%)
Value of your savings
$200,000
A difference
of over
$23,000!
$150,000
$181,604
(when paying
an MER of 2.45%)
$100,000
$50,000
$0
Year
Assumptions:
·$25,000 initial investment
·$3,000 annual contributions (based on $50,000 annual salary with 3% employer contributions and 3% employee contributions)
·Gross annual return of 6% (reduced by 1.75% for Manulife Group RRSP and 2.45% for the average Canadian Equity Fund)
The difference in fund management fees results in a difference
of over $23,000 in the investment’s value after 25 years.
How to make the most of your company-sponsored
Group RRSP from Manulife Financial
You can take full advantage of your company-sponsored Group RRSP in the
following ways:
Sponsor contributions – If you work at a company where your sponsor contributes to the plan, make sure you
understand the design of your plan to take full advantage of the money available to you.
Voluntary contributions – If your plan allows voluntary contributions, consider making regular contributions by
payroll deduction to your FutureStep Group RRSP. You won’t miss small amounts of money deducted from your pay,
and you’ll be surprised how those amounts add up over time.
Lump sum deposits – When you prepare your income taxes, rather
than paying the government, consider scenarios where you make a
lump-sum contribution to your company Group RRSP to lower your
taxable income.
Transferring assets – If you have savings at another institution, check
the MER you are paying. If it is higher than the IMFs in this plan, you
may want to consider moving your savings to your FutureStep Group
RRSP at Manulife Financial. For help transferring your money to
Manulife to take advantage of these lower fees, please speak with one
of Manulife's Financial Education Specialists at 1-888-727-7766.
Specialists are available from Monday to Friday, 9am to 5pm ET.
TIP - BEFORE YOU DECIDE TO
TRANSFER ANY EXISTING
ASSETS TO THE FUTURESTEP
GROUP RRSP, MAKE SURE YOU
UNDERSTAND WHETHER ANY
DEFERRED SALES CHARGES
APPLY TO YOUR FUNDS.
Fees you should know about
This table compares the fees you might pay through a typical dealer or intermediary, and the fees you pay with the
FutureStep Group RRSP from Manulife Financial.
Fee
Description
Typical fees associated with
investing through a dealer or intermediary
Fees with the
Manulife FutureStep Group RRSP
Sales Charges
A commission or sales
fee that is charged by a
fund company or
intermediary at the time
of purchase or
redemption.
Examples of sales charges a mutual fund company might
charge are:
When you buy units of a fund through
the Manulife FutureStep Group RRSP,
the fee charged to you is called an IMF
(investment management fee). An
example of an IMF for a Canadian
equity fund in the FutureStep Group
RRSP is approximately 1.75%
Front-end sales charge (or front-end load) – A charge
applied when you purchase units of a fund. A percentage
of your purchase is deducted and the remaining money is
used to purchase units of the fund, meaning less money is
available to purchase fund units.
Deferred sales charge (DSC) - A fee applied when you sell
units of a fund. Usually calculated as a percentage, this fee
will apply for a period of time after your initial investment
(often five or more years). The percentage deducted from
your withdrawal may decline the longer you hold the fund.
No load – Funds that are not subject to sales charges are
often called “no-load” funds.
Because you are investing through a
Manulife Financial group plan, the IMF
is usually lower than the MER you
would pay when investing directly in a
mutual fund. IMFs also typically remain
constant over longer periods of time
compared to MERs.
Note – These are common types of sales charges, but
there are variations in the investment industry. Ensure that
you understand the fees that apply to your investments
before you make any decisions.
Account
Administration
Fee
Annual fees charged to
cover the maintenance
and recordkeeping for
your account.
Your dealer or intermediary may charge you an annual fee
to administer your investments.
This fee is typically deducted from your account. Account
administration fees can range from
$50 to $150 or more.
A separate administration fee is not
deducted from your FutureStep Group
RRSP account. Administration costs are
included in the IMFs you pay on
your funds.
Other Fees
Itemized fees charged
for such transactions as
trading funds or
withdrawing money
from your account
A number of other fees may apply to your transactions.
These fees are separate from the charges described above.
They can be charged as a percentage of the transaction
value (such as 1%) or a flat dollar amount (such as $45).
Other FutureStep Group RRSP fees are
as follows:
Examples of other fees that a mutual fund may charge are:
Redemption fee – A fee for moving your assets from one
mutual fund company to another or for withdrawing your
assets from the fund.
Exchange fee – A fee that applies when you move from
one fund to another within the same mutual fund family.
Short-term trading fee – A fee for transferring out fund
assets that have only been invested for a short period of
time (i.e. 90 days).
Withdrawal fee (equivalent to the
redemption fee) – If your employer
allows withdrawals, your first
withdrawal in a calendar year is free,
and you pay a fee of $25 per
subsequent withdrawal.
Interfund transfer fee (equivalent to
exchange fee) – You are not charged
any fees for transactions you perform
over the Internet or through the Call
Centre. You can perform four free
interfund transfers per calendar year
using paper forms, and you pay a fee
of $25 for subsequent transfers in the
same year.
IF YOU HAVE QUESTIONS ABOUT THIS GUIDE OR THE FUTURESTEP GROUP RRSP, PLEASE CONTACT THE CUSTOMER SERVICE CENTRE
AT 1-888-713-7788. YOU CAN SPEAK WITH A REPRESENTATIVE FROM MONDAY TO FRIDAY, BETWEEN 8 A.M. AND 6 P.M
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05/2011