Nearly three quarters of people who had recently transferred their pension (72%) didn’t know exactly what the fees for their old pensions were, or what they were being charged for their new one. While one in 10 (11%) didn’t think their new pension had any fees or charges.
Analysis shows that for a 30-year-old earning £30,000, moving a £10,000 pension pot from a provider charging 0.4% to one charging 0.75%, would leave them £32,834 worse off when they retired at 67. If they moved a £50,000 pot, they would have £59,523 less to live on in retirement. And if the same person is earning £45,000 and moves a £50,000 pension, they will be £72,689 worse off in retirement.
People’s Partnership believes the pension industry needs to be more transparent and should help savers understand key information when transferring their pension, to prevent them from making detrimental financial decisions for their future.
Commenting, 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. Unfortunately, very few people know exactly what they are being charged for their pensions and they are being let down by an industry that doesn’t make this information easy to find or understand. 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.
“Our research shows the real-world impact of small differences in percentages are incredibly hard to grasp, so the onus is on the pension industry to make sure consumers understand what they are being charged. We are taking direct action to provide our members with more guidance through the transfer process and are creating tools that will support them to make informed decisions that are in their best interests. We passionately believe that there must be an obligation on pension providers to give clearer information to those savers who are considering transferring and the industry must move to provide comparable consumer focused value metrics. ”
People’s Partnership found that only half (50%) of respondents said it was easy to find information on fees and charges from both their old and new pension providers. The research suggests fees aren’t anywhere near as important a consideration as they should be when transferring a pension, and that people don’t appreciate how seemingly small differences in costs can lead to significant differences in real terms.
Peoples Pension Transfer report
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