Pension fee fog: 83% of UK savers have no idea what they’re paying in fees when it comes to their retirement pots

Pension fee fog: 83% of UK savers have no idea what they’re paying in fees when it comes to their retirement pots, reveals new interactive investor research 

• The vast majority of UK pension savers (83%) don’t know what they’re paying in pension fees, leaving many vulnerable to poor value and reduced retirement outcomes

Today’s pension savers face mounting challenges when it comes to building long-term wealth. Despite the crucial impact fees can have on retirement outcomes, the vast majority remain in the dark about what they’re paying.

According to new research from interactive investor, the UK’s second largest investment platform for private investors, a staggering 83% of UK adults have no idea what they’re paying in pension fees – in either pounds or percentage terms. This could mean that millions of savers might be unwittingly paying over the odds for their pensions, leaving them worse off later in life.
 
Craig Rickman, Pensions Expert, interactive investor, explains: “Every pound you pay in fees that doesn’t translate to a better outcome, is a pound less for you to enjoy in your golden years. The tricky part for savers is that, while portability of pensions means that you can switch to somewhere else that provides better value, many don’t know how much their current providers charge. They have no idea whether their existing pensions offer fair value.
 

Why the complexity?

 
“It’s incredibly concerning that the majority of savers are still in the dark about what they’re paying in pension fees. But it is easy to see why.

“The cost of pension plans varies widely – not just in size, but also in how they’re applied. From account fees and fund charges, to trading and exit fees, it can be difficult for consumers to understand the total cost.

“Account fees are typically charged as a percentage, based on the size of your savings, often tiered with larger savings attracting lower rates. This can be appealing if you’re at the start of your savings journey and your pot is relatively small, but as your fund grows over time, your fees follow suit, eating away at your eventual retirement pot.

“Overpaying in fees can take a serious toll on people’s future retirement pots, especially when the fees are deducted in ways that can go unnoticed. Many pension savers are worried they won’t have enough in retirement – and sadly, the data shows that if action isn’t taken, they could be right.

“There are just too many hoops you have to jump through to be able to find out what you’re paying in pension fees, overall. People are left without the full picture at a time when they need clarity more than ever.”

Camilla Esmund, Senior Manager, interactive investor adds: “It’s time for providers to be crystal clear about what they charge and how this impacts their customers. interactive investor’s flat-fee model removes the guesswork – our customers know exactly what they’re paying, and crucially, what they’re getting in return.

“To help savers take control of their pensions, ii has developed a SIPP charge comparison tool. All you need to do is punch in the total value of your pensions to see how various leading pension providers’ costs stack up against each other.

“We believe value should grow with your savings, not erode them. Transparency is key to better retirement outcomes.”