Half of adults unaware of pension scheme annual fees

Conducted by Moneyfarm, the survey comprising 2,000 Brits, also found out of those who are aware of the fees, 50 per cent have no idea what the amount is with 73 per cent unsure how they would go about finding out. 

Only a third of respondents thought they roughly knew what their annual fees amount to and only 18 per cent knew exactly how much it was. 

Moneyfarm said the ‘hidden costs’ revealed that fees paid on pension schemes are a “financial blind spot” for the majority of people. 

The findings also revealed that Brits are on average paying annual charges of 2.5 per cent, which according to Moneyfarm is “way over” what would be considered a reasonable amount.

However, 53 per cent thought their fees were competitive and only 23 per cent thought to shop around and switch providers to benefit from lower fees.

Carina Chambers, pensions technical expert at Moneyfarm, said she would consider annual fees of around 1 per cent to be a “reasonable amount”. 

“A seemingly small amount in fees can lead to significant shortfalls over the long term. The difference between 2.5 per cent and one per cent doesn’t seem much, but when it comes to pensions, we are talking about a large amount of money which is invested over a long period of time. That apparently small percentage difference therefore compounds, so the losses we are talking about can be very significant,” she added. 

The research also found 90 per cent of respondents did not realise platform charges were associated with having a pension. 

Some 83 per cent were not aware that fund fees were associated and 68 per cent did not realise that management fees existed on their pension scheme.

In addition, 76 per cent of respondents didn’t realise they were paying VAT on their pension, with a further 46 per cent ‘shocked’ to learn that they are being charged admin fees on an annual basis.

“We hear anecdotally, and it is backed up by this survey, that people find it hard to understand what charges they are paying on a pension scheme, even when they have the statement in front of them. They can be very hidden. It may be easier to think ‘why bother finding out’, but you really shouldn’t put your head in the sand.

“Our caution is that whilst charges can sound minuscule, over time it could make a massive difference – a difference to the tune of tens of thousands of pounds – to your final pension pot, so shop around,” Chambers added.

alina.khan@ft.com