Pension warning: Savers might not be aware they are being CHARGED to put their money away

The number of people saving into a pension pot has reached record highs in the last six years, with millions of more savers acting on their retirement thanks to automatic enrolment schemes. However, Minister for Pensions Guy Opperman has warned savers might not know that they are most likely paying fees to put away their money. The Government has recently introduced new laws forcing pension schemes to publish exactly what savers get for their fees. It has also been made compulsory for pension schemes to pass this information directly to savers.

Mr Opperman said: “Savers need to know exactly what they are getting from their money.

“Pensions can be perplexing but you can cut the confusion with these four question and find out how your cash is used by your pension scheme.”

Here, he explains what questions you should be asking your pension provider.

Savers are always advised to speak directly to their provider regarding questions on their money.

For additional help, future retirees can also speak to Pension Wise for free and impartial Government guidance about your options.

WHAT DID I PAY FEES FOR IN 2018?

There are two kinds of fees you could end up paying: charges or costs.

Charges are the basic costs of paying into a pension.

Costs cover the buying and selling of the assets which make up your pension pot.

Mr Opperman said: “New Financial Conduct Authority rules now require investment managers to give this information to pension schemes and they are required to pass this onto you.

“Sometimes higher charges or costs yield better results – often they don’t.”

HOW DOES THAT ADD UP OVER TIME?

While total costs and charges of one percent might not sound like a lot, this soon adds up over time.

Think of this as one-and-a-half percent of your savings each year.

Mr Opperman said: “We have created new laws so that when you get cost and charge information you are shown the effect of costs and charges on your savings.”

WHAT DID THAT GET ME IN INVESTMENT RETURNS?

Mr Opperman said it can be worth paying a little more if you can get better pay outs.

But this is not always achieved by higher costs.

Mr Opperman said: “Ask your pension scheme what returns your fund has got after the deduction of charges and transaction costs and compare this with other funds.”

HOW DO I TRANSFER?

You should be free to transfer from one pension scheme to another, and most modern schemes allow you to do that without a fee.

However, you should check with your boss before you transfer out of your current workplace pension as most employers may not agree to pay into just any pension scheme you nominate – only the one they have chosen on your behalf.

Mr Opperman said: “You probably have several pension pots.

“Check the costs, charges, and returns form these pots and if you get a better deal consolidate these to make them easier to manage.

“Make sure you check with your provider whether there are any exit fees before you transfer.”