Martin Lewis gives his advice on state and private pensions
Pension saving can be undertaken in a variety of measures, including through workplace auto-enrolment and private pension arrangements. However, saving towards retirement comes with fees and charges which could affect a total pension pot. Failing to understand these may mean Britons are in for a nasty shock when they ultimately come to retire.
Now, pension savers are being warned to take more of an active role with their retirement pot, due to research showing a severe lack of understanding.
A study undertaken by Boring Money, showed nearly half of respondents could not guess the amount they pay each year in pension charges.
While the research indicated people did know there was some kind of fee, they could not estimate it in either pounds or pence, or percentages.
Some 1,000 adults across the country were asked about their attitudes towards retirement saving.
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Becky O’Connor, Head of Pension and Savings at Interactive Investor, commented on the findings.
She said: “In any other context, it would be considered totally wrong for people not to know what they are paying for something – particularly something that is so valuable and can be so costly.
“People can’t make good decisions without information. At the moment, the barrier is that people don’t know what they don’t know.
“Once they do know the basics, like their pension is invested in funds, which invest in companies, or that the fee they are paying is higher than average, that information becomes something they can do something with.
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“But we need more ‘meaningful transparency’ of information that people can understand and use to take action if necessary.”
The charges people may have to meet on their pension are likely to vary, depending on their arrangement.
However, many people will have to meet an annual management charge as the cost of running a pension scheme.
Some will have to meet an investment charge relating to the buying and selling price of a unit.
There may also be charges for those who wish to transfer their pension pot.
The Pension Advisory Service has urged Britons to investigate the charges they could incur when saving into a pension.
It has said pension providers should provide individuals with full details relating to the charges which may apply to their scheme.
It is, however, down to Britons to truly understand the information presented to them, by reading carefully and potentially undertaking more research.
Richard Wilson, CEO of Interactive Investor added: “Thousands of people are taking their retirement journey in the dark – and that means an uncertain retirement destination.
“We call on the industry, the government and regulators to mandate meaningful transparency from the life companies, both in term of where and how pensions are being invested, and how much they cost.
“It’s not a big ask – but it is long overdue.”
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