Pension savers could potentially be left thousands of pounds worse off in retirement due to overlooking charges when transferring their funds, a provider is warning.
Just over seven in 10 (72%) of people who had recently transferred their pension did not know the exact fees for their old pension, or their new charges, according to a survey for People’s Partnership, which provides the People’s Pension.
It called for greater industry transparency to ensure savers understand key information when transferring their pension, with seemingly small differences in percentage charges adding up to significant amounts in cash terms over the years that money is invested.
If people can’t make an informed decision about the value they are being offered by different providers, they risk losing thousands of pounds from their retirement pots
Patrick Heath-Lay, People’s Partnership
As well as charges, the potential growth on money invested is another fundamental aspect of the attractiveness of a pension, People’s Partnership said.
Patrick Heath-Lay, chief executive officer at People’s Partnership, said: “While there are many factors that can make a pension attractive, the two fundamental aspects are investment returns and charges.”
He added: “If people can’t make an informed decision about the value they are being offered by different providers, they risk losing thousands of pounds from their retirement pots.
“This lack of transparency is an enormous issue that pensions providers have to address.”
People’s Partnership commissioned a survey of 1,000 people in November to December 2023 who had consolidated their defined contribution (DC) pensions without the help of a financial adviser in the previous two years.
Half (50%) of those surveyed said it was easy to find information on fees and charges from both their old and new pension providers.
We and our members know that customer understanding is essential
George Ritchie, ABI
George Ritchie, senior policy adviser for long-term savings at the Association of British Insurers (ABI), said: “Navigating the financial world can be confusing and it’s vital we do more to help people save, invest and make informed decisions about their pensions.
“We and our members know that customer understanding is essential, and that’s why we’ve partnered with Plain Numbers and Fairer Finance to help make sure documents and numbers are presented in a way that is as straightforward as possible.
“This includes encouraging firms to do more of the maths for their customers, for example by converting percentage fees into pounds and pence, and to highlight the most important information first.
“We’re supportive of regulatory initiatives currently being considered that could help guide customers towards better outcomes for pension transfers and are working with our members, the regulators and Government departments to ensure any changes work for the industry and customers alike.”
