You probably know that your pension provider charges you an annual management fee, but are you aware of the whole host of additional fees that they may be taking from your pension pot? These extra charges are often buried in the small print or hidden behind benign-sounding financial jargon, but their impact can be huge: research has shown that some people could pay up to two thirds of their money in fees over the course of a lifetime. We think this is pretty outrageous, so we’ve uncovered some of the most scandalous pension fees out there.
1. The service or policy fee
You may think that the cost of managing your pension is covered by your annual management charge. While that’s a reasonable assumption, it’s not necessarily the case. Some providers stick on a separate policy fee, apparently to cover ‘administration costs’.
2. The contribution fee
Your pension provider is happy when you put money into your pension, right? Well if so, contribution fees are a funny way of showing it. Some providers will take a cut of your contributions, for example taking 2% of each payment you make into your pension pot, on top of the annual management fee they’re charging.
3. The inactivity fee
If you stop paying into your pension, you may be penalised in the form of an inactivity fee. These fees are often given a positive spin, referred to as ‘active member discounts’. However you dress them up, these are essentially charges that you have to pay because you’re no longer paying money into the scheme, perhaps because you’ve changed jobs.
4. The exit fee
So you may face a fee for keeping your money where it is, for adding more money to your pension pot, or for stopping your contributions. But if you try to move your pension away from the scheme… Yep, you guessed it, you may get hit with a fee there too. Although we know from experience there are costs associated to move a pension, some providers try to lock you in by charging steep exit fees if you try to move your money to another provider.
5. The platform fee
Sounds mysterious, doesn’t it? We’re not sure why it’s necessary either, but some providers have found another fee to add in the form of a ‘platform fee’, apparently for the privilege of using their service.
These are just some of the fees that you may be paying, out of a total of around 18 different charges levied by pension providers. At PensionBee, we do things differently. We charge a single annual management fee. There are no hidden service fees, platform fees, or any other kind of fees.