Pension Charges: What Are They?

Any pension comes with charges and the nature of these pension charges really depends on which provider your pension is with. You should be aware of what you are paying as the charges can affect your savings.

The pension charges that you are paying will depend on your fee structure chosen by your pension provider. Some providers charge an annual management fee but plenty of other providers take a different approach and impose all manner of fees on top of this.

Pension charges can range from annual management fees to costly exit fees. We will explain the difference below:

Annual management fee

This fee pays for your pension management costs such as expenses involved in administration. Be sure to look at the small print because pension providers hide fees so the headline annual management fee may not represent the total amount you are being charged.

Service or policy fee

In addition to the annual management fee some providers will add this fee on to cover administration costs.

Underlying fund fee

This is a widespread charge that pays the money managers. It is a fee that is often hidden and comes on top of the annual management charge.

Inactivity fee

Some pension providers will charge an inactivity fee, for instance, if you stop paying into your pension you will be penalised. You should be aware of these especially if you have moved jobs and have several dormant pensions.

Contribution charge

This is a percentage that is taken out every time you pay into your pension. Some providers charge 2% every time you pay into your pension pot, meaning the cost of those monthly contributions can really add up. Thankfully this charge does not occur as much as it used to.

Exit fee

This is when you are charged a fee to withdraw or transfer your savings. The Financial Conduct Authority imposed a cap of 1% for savers over 55 and an exit fee ban on any new plans. Some providers are making transfers difficult with high exit fees however we can provide you with advice in this area.

Platform fee

Some providers add another charge in the form of a platform fee, a cost they impose for the privilege of using their service.

At Resolve Financial Solutions, we can investigate the current pension plans you have and highlight any pension charges that could occur. We will work with you to make a financial plan as to the best solution for your circumstances when it comes to your pension. Please get in touch if you would like to discuss your pension in more detail.

Please note: Your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

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