Hard-working savers caught in ‘the financial advice gap’ are paying over £2bn in unnecessary pensions management charges each year. Profile Financial, the UK’s leading Independent Pension Professionals, is today launching a report** that shines a light on the UK’s lazy pension pots.
The report reveals £180bn* of our pensions savings are languishing in pension funds that are not delivering results, and the annual average fee people pay on their pensions is 1.47 per cent***. However, some modern pension providers charge as little as 0.34%, meaning over £2bn is being wasted in unnecessary pension fees each year.
The difference between the lowest annual fees and the average fee might not seem like much to the individual saver, but these charges quickly add up over the course of a career. A 35-year-old with the national average £22,000 pension pot***, paying the average fee of 1.47 per cent could save over ?9,000 just by switching to a lower cost provider at 0.34 per cent.
Three quarters (73 per cent) of us do not check that our pensions are performing properly and 60 per cent don’t know how much we are paying in fees each year****. This is perhaps not surprising given that 41 per cent of people have never spoken to an adviser or their pensions manager about their pension. As a result, over a third (38 per cent) of people don’t know the investment performance of their pension, and 38 per cent (same number) don’t know how risky their pension investments are.
Simon Vella, Pensions Expert at Profile Financial said:
“For most people, their pension is their biggest financial asset aside from their house. But while everyone knows the value of their property, and how much the mortgage costs each month, very few people know the total in their pension and how much they pay in fees each year.“The fees are a scandal, but the issue actually goes way beyond this. Having lazy pension pots can also mean your savings are not invested properly to match your expectations, and it can mean you won’t be able to take advantage of new pensions freedoms when you want to retire.”
Billy Burrows, independent pensions expert, added:
“As people live longer, it’s more important than ever that those approaching retirement see their pension pots continue to grow. Unfortunately, far too many are paying charges that are far too high.
“Some savers with the oldest pensions are at serious risk of actually losing money through high charges on their pensions. Hard-working savers spend their entire careers grafting for others, it is only right that their pension pots work equally hard to provide a comfortable retirement for them.”
* 38% of personal pension pots are being left without supervision or advice. 38% of the total £475bn of UK personal pensions (source: Pensions Policy Institute) is equal to ?180bn
*** Profile Financial data sourced by review of over ?420m of personal pension assets.
**** Findings from nationally representative Opinium survey of 2,000 UK adults
Read the full report here