Pensions savers could be getting hit by £2 billion of unnecessary fees every year, claims a UK specialist
Hard-working savers caught in ‘the financial advice gap’ are paying more than £2 billion in unnecessary pensions management charges each year, according to a UK specialist.
The report by Profile Financial has revealed that 180 billion of our pensions savings are languishing in pension funds which aren’t delivering results, and that the annual average fee people pay on their pensions is 1.47%.
But it says some modern pension providers charge as little as 0.34%, meaning that over £2 billion is being wasted in unnecessary pension fees each year.
It claims the difference between the lowest annual fees and the average fee might not seem like much to the individual saver, but these charges quickly add up over the course of a career. A 35-year-old with the national average 22,000 pension pot, paying the average fee of 1.47 per cent could save over 9,000 just by switching to a lower cost provider at 0.34 per cent, for exmple.
According to the report, three quarters (73%) of us don’t check that our pensions are performing properly and 60% don’t know how much we are paying in fees each year.
Profile Financial says this is perhaps not surprising given that 41% of people have never spoken to an adviser or their pensions manager about their pension. As a result, over a third (38 per cent) of people don’t know the investment performance of their pension, and 38 per cent (same number) don’t know how risky their pension investments are.
Simon Vella, pensions expert at Profile Financial, said: “For most people, their pension is their biggest financial asset aside from their house. But while everyone knows the value of their property, and how much the mortgage costs each month, very few people know the total in their pension and how much they pay in fees each year.
“The fees are a scandal, but the issue actually goes way beyond this. Having lazy pension pots can also mean your savings are not invested properly to match your expectations, and it can mean you won’t be able to take advantage of new pensions freedoms when you want to retire.”
Billy Burrows, an independent pensions expert, added: “As people live longer, it’s more important than ever that those approaching retirement see their pension pots continue to grow. Unfortunately, far too many are paying charges that are far too high.
“Some savers with the oldest pensions are at serious risk of actually losing money through high charges on their pensions. Hard-working savers spend their entire careers grafting for others, it is only right that their pension pots work equally hard to provide a comfortable retirement for them.”
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