Almost three quarters (73%) of savers who transferred to their pension pot were unaware of the fees involved, creating a potential loss of £70,000 in retirement, a study reveals.
One in 10 (11%) of the 1,000 respondents didn’t think any fees would be involved when making the changes too, according to provider People’s Partnership.
Depending on the pension plan, fees can include set-up charges, administration costs, and “dealing commission to trade funds and shares”. The prices are a mix of one-off fees, and some use a percentage of your total retirement kitty.
The pension provider noted one example, where a 30-year-old earning £30,000 who is moving a £10,000 pension pot from a provider charging 0.4% to one charging 0.75% would be left £32,834 worse off when they retired at 67.
When a £50,000 fund is considered, that would equate to £59,523 less to live on after working life. This loss escalates to £72,689 with a £45,000 salary and the transferral of a £50,000 pension pot.
Meanwhile, this spotlight on the pension knowledge gap follows a separate report by the Pensions Policy Institute (PPI). It called for an improvement in industry collaboration that could help boost savers’ knowledge and retirement funds.
Calls for widespread improvements in the pension industry
People’s Partnership also agrees that more needs to be done when it comes to key information shared within the industry, so savers are prevented from making “detrimental financial decisions to their future”.
Patrick Heath-Lay, CEO at People’s Partnership, said: “While there are many factors that can make a pension attractive, the two fundamental aspects are investment returns and charges. Unfortunately, very few people know exactly what they are being charged for their pensions, and they are being let down by an industry that doesn’t make this information easy to find or understand.
“If people can’t make an informed decision about the value they are being offered by different providers, they risk losing thousands of pounds from their retirement pots. This lack of transparency is an enormous issue that pension providers have to address.”
Heath-Lay added: “We passionately believe that there must be an obligation on pension providers to give clearer information to those savers who are considering transferring, and the industry must move to provide comparable consumer-focused value metrics.”
