All pension plans come with charges, but these fees can differ greatly depending on the type of pension, the provider and the investments you have. In some cases, the money you are paying in pension fees could be eating into your savings significantly. Some savers, unaware of their specific pension charges, are seeing £13.5k disappear from their pension pots. It is important to understand pension charges so you can establish whether you are paying out too much in pension fees.
What pension fees are there?
If you are paying into an individual or defined contribution pension scheme you will likely be paying some charges. These are often linked to any administration needed or investment management that is taking place.
Workplace pension schemes tend to have lower charges than individual schemes and you can often find out what charges apply to your account straight from your employer. However, it often depends on the provider.
If you are unclear on what pension fees you are paying here is an overview of some of the most common charges.
- Set up charge
- Annual management charge
- Service fee
- Underlying fund fee
- Transaction fee
- Inactivity fee
- Contribution charge
- Platform fee
- Exit fee
Is there a greater issue with pension fees?
Frankly speaking, the main issue with some pension providers is lack of transparency. Why should you have to decipher complicated small print when it comes to saving for your retirement? When it comes to your savings and investments what you’re paying in is crystal clear, so any outgoings charged from the provider should follow suit.
In early 2018, the British Steel Pension Scheme (BSPS) came under fire from the Work and Pensions Committee. Some account holders with BSPS were said to have been ‘shamelessly bamboozled’ by BSPS advisers into transferring their pensions into investments with high management fees and extortionate exit fees.
The pensions industry took the spotlight again last month, when the committee opened an enquiry to establish whether savers are being provided with sufficiently clear information regarding their accounts.
The Work and Pensions committee is committed to ensuring pension holders’ money is safe and have expressed a primary concern regarding consumers understanding of the fees they could have to pay and why.
The committee wants pension holders to be engaged with their pensions and for all marketing material and paperwork to be concise, simple and easy to understand. All information, including in-house financial advisers, should be impartial and focused upon providing the account holder with a clear strategy.
How safe is your pension?
The hours put in by the Work and Pensions Committee is invaluable when it comes to protecting the pensions and rights of those saving for retirement. Whilst the ongoing work of the committee, the FCA and government will undoubtedly encourage pension providers to provide clear information on their fees, all savers should take the time to read any paperwork scrupulously. If you are at all concerned about your pension you should seek the help of an impartial financial advisor.