Basically, it looks as though the assumed gross investment return (the figure cut off in the bottom-right hand corner of the photograph) is about 0.25% per annum. So what we have here is a single premium contract in which €15,677.04 has been invested. Each year the fund is projected to grow by 0.25% but to suffer a 1.25% management charge, mean that when both are taken into account the fund shrinks by about 1% a year.
The 0.25% growth assumption is extraordinarily low. Either it's a flat-out mistake or its a projection for a PRSA which has been invested in some very low-return (and presumably low-risk) asset class, like a bank deposit.
The annual charge of 1.25% is high and you can do better by shopping around. But investing the fund in cash or near-cash for 23 years would be a bizarrely inappropriate decision, Most products do offer a cash option, because there are times when it;s the right one. But those are very short times. For example, if you're retiring in 3 months time and you want to take your tax-free lump sum and use it to clear your mortgage. You might move a large chunk of your fund to cash or similar asset classes because you don't want to be affected by maket volatility over the next three months, and missing out on 3 months of share market investment returns is a price you're willing to pay for that stability.
But hold your retirement savings in cash for 23 years? No; I struggle to think of circumstances in which that is the right decision for anyone.
In a sense, this projection is doing what it should do, and telling you something important, which is that holding your retirement savings in cash or near-cash for 23 years is a really bad idea, and you shouldn't do it.
The heavy mangement charge simply underlines the point. But of the the two errors being made here — choosing a product with an uncessarily high management charge, and investing the fund in low-volatility, low-return asset classes — the second error is the one doing more damage.
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