Small Fee Differences Impact Long-term Investment Returns

Higher annual investment fees significantly reduce retirement savings over long periods in South Africa.

Updated on Oct. 26, 2026 in Financial Planning

Bold flat-color editorial illustration of a single coin balanced on a mountain ridge, representing the impact of investment fees. — New data from IFSA Asset Managers shows that a 1% difference in annual investment fees can erode retirement savings by R1.6 million over 25 years. AI Illustration. Upload story photo >

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Should you prioritize keeping your investment fees low over potential market returns?

IFSA Asset Managers reports that a 1% difference in annual investment fees can cost investors nearly R1.6 million over 25 years. This highlights the critical role of fee structures in determining total retirement income.

Why it matters

Investment fees compound alongside returns, meaning higher costs systematically erode savings and monthly retirement income. The Financial Sector Conduct Authority is responding by developing a value-for-money framework for retirement products.

A R1 million investment at 10% returns results in R7.69 million with 1.5% fees versus R6.10 million with 2.5% fees after 25 years. These costs also impact withdrawal potential, lowering monthly retirement income from R30,800 to R24,400.

The players

IFSA Asset Managers

This investment management firm performed the calculations regarding the impact of fee structures on long-term capital accumulation.

Financial Sector Conduct Authority

This is the national regulatory body currently working on a value-for-money framework for retirement savings products in South Africa.

Morningstar

This global financial services firm provides investment research and produced the 2026 US Fund Fee Study.

S&P Dow Jones Indices

This global index provider tracks market performance and published data showing active fund underperformance in South Africa.

The details

Investors are increasingly moving toward lower-cost options, as seen in the US market where the cheapest funds attracted USD 694 billion in 2025. Conversely, high-fee active equity funds in South Africa often fail to outperform benchmarks, with 80% lagging the S&P South Africa Composite Capped index in 2025.

2025: Market performance and fund outflow data recorded.
Mid-year 2025: Fund performance and survival scorecard data published.
2026: Morningstar US Fund Fee Study published.
10-year period: Comparison of fund performance against benchmarks.
25-year period: Comparison of fee impact on total investment value.

Market Dynamics

This data underscores the shift toward regulatory oversight exemplified by the Financial Sector Conduct Authority value-for-money framework. Such initiatives align South Africa with global trends, where fee transparency is increasingly mandated to protect long-term investor capital.

Retail investors should review their current fund expense ratios to understand how small percentage differences affect their long-term nest egg. Reducing these costs can significantly increase the monthly income available during retirement.

The takeaway

Selecting lower-cost investment vehicles remains one of the most reliable ways to preserve capital over multi-decade horizons. Investors should prioritise transparency and verify that fund performance justifies any associated management fees.