Pension charges over 3%

Independent body set up to look at high pension charges finds some pension savers in old schemes being charged more than 2% or even more than 3% a year.

Out of £67.5bn of pension savings looked at by the Independent Project Board set up by the Association of British Insurers in response to concern about high charges:

£42bn had charges under 1% a year

£25.8bn was exposed to over 1%

£13.4bn of that potentially exposed to over 1.5%

£8bn of that exposed to over 2%

And £0.9bn exposed to over 3% in annual charges.

http://www.fca.org.uk/static/documents/defined-contribution-workplace-pensions-ipb.pdf

The government is banning charges over 0.75% in NEW schemes from April next year.

Huge cost of pension charges

Paying 1% a year on your pension savings, rather than 0.5%, could cost you £77,900.

Paying 1.5% rather than than 0.5% would cost you £144,200.

That is how much less your fund would be worth because of higher charges -assuming you started putting in £100 month and raised contributions gradually over 46 years and got some decent investment growth.

The analysis comes from the DWP's consultation on capping charges at 0.75% or 1%.

The Pensions Minister, Steve Webb has put off imposing a cap until after April 2015

The average charge for new savers is 0.51% but thousands are already on higher rates.