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UK savers pay higher pension fees and miss out on interest payments by failing to shop around, industry figures have warned.
More than 80 per cent of savers are unaware what they pay in pension fees, according to investment platform Interactive Investor.
At the same time, 80 per cent of the 8.3mn current accounts in the UK containing balances of £10,000 or more are earning zero interest, said Spring, a savings app.
Those failing to switch pension platforms when faced with higher administration costs for retirement pots could be left worse off when entering the “golden years”, said Craig Rickman, personal finance editor at Interactive Investor, an investment platform.
“It’s incredibly concerning that the majority of savers are still in the dark about what they’re paying in pension fees,” he said.
“The tricky part for savers is that while portability of pensions means you can switch to somewhere else that provides better value, many don’t know how much their current providers charge. They have no idea whether their existing pensions offer fair value,” he added.
Consumers often fail to grasp the cost of pension plans due to the various fees, including account and exit fees. The more a person invests, the more fees increase, which eats away at savings, said Interactive Investor.
In addition, consumers fail to benefit from interest payments by keeping money in current accounts instead of switching to savings accounts such as Isas, according to Spring.
“We see too many savers leaving their money in poor paying accounts with their current account provider,” said Derek Sprawling, managing director of savings at Spring.
“Many are sitting on sizeable balances that could be earning them a great rate of return elsewhere. Current accounts are not designed as savings vehicles.”
Some consumers fear losing easy access to money by moving to savings accounts, in particular those that impose restrictions, said Spring.
Accounts offering higher savings rates often limit access to funds, with penalties if money is withdrawn.
“While many like the idea of keeping some money in their current account for emergencies, having a balance in a no or low interest paying account risks that cash asset not being considered as an asset at all,” Sprawling added.
Overall, despite 45 per cent of investors across all forms of investments saying they would switch platforms in order to pay lower fees, only 7 per cent check the costs before opening a new account, Interactive Investor added.
“It’s clear we have glaring pension engagement gaps in the UK — but these blind spots around fees are particularly worrying. Even though we can’t control the market, you can control how much you pay to invest,” said Camilla Esmund, senior manager at the group.
“This issue is broader than pensions alone. Unfortunately, it is not always easy for consumers to clearly see the costs associated with their investments — not least the platform charge. But it is well worth consumers checking how much they are paying.”
