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Beware! Pension Charges Could Be Threatening Your Retirement Plans


You might think your pension is performing nicely, but high charges could be eating into your profits and stifling your pension’s growth. Unfortunately, charges are inevitable with pensions, but the amount you pay can differ considerably between pension providers. 

Furthermore, just because you are paying high fees doesn’t necessarily mean you’re getting the best performance, and in many cases, the opposite is true. Read on to discover more about pension fund charges and how you can reduce what you’re paying.

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Types of Pension Fund Charges

Depending on the type of pension you have, there are various types of charges you might be paying:

  • Annual Management Charges. These are also known as Provider Charges, and they refer to the fees you pay to cover your pension’s running costs.
  • Platform or Fund Charges. These charges tend to be lower. They include trading fees as well as the costs of the technology or system used to trade.
  • Ongoing Management Charges. You might use a financial advisor to manage your investments. Their services would be paid for through ongoing management charges. If you don’t already use a financial adviser, it’s worth considering that people who do use one have an average of £30,000 more in their pension pots.

How Charges Can Affect Your Pension

Your pension gets invested over a long period, so even slight differences in the amount you pay in fees can considerably mount up. You must understand what charges you are paying and the impact those costs are having on your pension’s performance. 

If you don’t know, you should contact your pension provider immediately to find out. A regulated financial adviser can also help you with this issue.

Why Do Charges Differ Between Pension Providers?

As we alluded to above, paying higher charges does not always guarantee a better service. If you took a pension out before the introduction of digital technology and online software systems, the chances are your pension was being manually managed. Newer pension plans benefit from new technology and the reduced administration that comes with it, so your fees with newer pensions are likely to be lower.

Despite such technology having been around for some time, your pension provider may not have updated from an old paper-based system. Not only are these time-consuming and more labour-intensive, so being more expensive, they are also likely to perform worse. 

If you fail to review your pension regularly, your charges could creep up without you noticing, and you could be paying a lot more than needed. Your pension provider may not realise that your charges have gone up, or they may hope that you don’t notice the increase. Newer pension schemes tend to be more efficient, so you should benefit from lower charges.

Reducing Your Pension Charges

If you use a regulated financial adviser, they will help ensure that you’re not paying too much in charges. Some companies will offer to reduce your charges by combining your pensions into a single scheme. 

However, many of these companies offer no advice and may not check your pensions’ current fee-status. As they don’t know what charges you are currently paying, you can’t be sure that they’ll reduce them. This situation means you could end up paying the same level of fees, or worse.

If you use a regulated financial adviser, they will check your existing pension schemes and charges. They’ll also compare these to similar products on the market and assess if these are better suited to your needs. This option is worth considering before you make any critical financial decisions.

Paying No Charges?

An old type of scheme popular several years ago was a with-profits pension. One of the main selling points of these pensions was that they came with no charges. 

This benefit may seem too good to be true, and it’s worth boring into this aspect. While there may be no apparent fees, you should assume that you’re being charged at some stage of the process. If you’ve got one of these pensions, it is worthwhile getting it checked over.

When thinking about your pension, speak to a regulated financial adviser such as Portafina or, view the information at The Money Advice Service.