As with most products or services, your pension plan will likely come with some charges. These fees can vary dramatically, from the painfully high to the surprisingly low.
In many cases, although you pay higher charges, it does not necessarily mean you will get a better service. However, one thing you can be sure of is that high costs will erode your pension funds. Therefore, you may be paying a lot of money and getting nothing back.
This brief article aims to inform you about pension charges and why they could be jeopardising your future.
Types of pension charges you might be paying.
There are various types of pension charges, and you could be paying some or all of them. These pension charges include the following:
Ways that pension charges affect you.
You may think that the pension charges you are paying are small. However, they can have a considerable impact on your pension part over its lifetime.
Therefore, you must know what charges you are paying and how these will affect your pension pot. If you fail to understand these fees, they could slowly erode your funds without knowing about them.
If you are aware of what you are paying, you can correct the situation. Therefore, contact your pension provider and find out exactly what charges you pay.
Why do pension charges differ across providers?
Unfortunately, just because you pay more in charges doesn’t mean you will get a better service for your money. Also, you may find that you pay different amounts to different providers for the same product.
A common reason for paying higher charges is that the provider uses an old system. Pension providers have benefited from digital technology and Internet efficiencies in recent years.
These technologies speed up processes and make management more efficient. If your pension provider uses an old paper-based system, they will not benefit from such efficiencies. Therefore, you will pay higher pension charges.
On some occasions, you may still end up paying higher charges even if your provider is using a modern system. That is because they may not have changed your charge rate when they change systems. This situation may have occurred either because they forgot, or they might have been hoping you wouldn’t notice the change and keep paying at the higher rate.
Reducing your pension charges.
There are a couple of ways to reduce your pension charges. One is to use a specialist company, and the other is to go through a regulated financial advisor.
If you choose to use a specialist pension-combining company, that is pretty much the only service you will get. They will take all of your pensions and combine them into a single fund.
The problem with the service is that they are focused on combining your pensions, not necessarily reducing your charges. Therefore, you may end up no better off than you were before combining your pensions.
Using a regulated financial advisor, you can get an assessment of your pension’s charges and value. They can then compare your existing pensions with what is available on the current market. Once you have this assessment and comparison, you can decide whether you combine pensions or leave them as they are, whichever is best for you financially.
Do you think you’re not paying pension charges?
Several years ago, a popular pension was the with-profits scheme. Providers sold this pension on the promise of it coming with no charges. However, they did have fees in reality, but these were not transparent.
If you have one of these pensions, it is well worth getting it checked out. As well as having hidden charges, there are other issues with these pensions. Therefore, it’s advisable to discuss them with a regulated financial advisor.
