Personal Pension Costs
Controlling and planning for the costs of managing savings is never more important than when it comes to your personal pension funds.
This is because any fees you pay will compound for many years before your retirement – so even a small reduction in your pension plan costs could make a big difference to the size of your pension pot.
It’s important to understand which charges could apply to the personal pension plan of your choice and how these fees may affect your retirement savings.
Here’s a rundown of some common personal pension costs…
Which charges will apply to my personal pension?
Charges and fees can eat into your savings, so it’s important you’re clear on all potential costs before you set up a personal pension. Here are some common pension fees you may encounter:
- Annual management fee – This is the admin cost of managing your pension
- Service fee: This is another admin fee some providers will add on to your charges
- Inactivity fee: Some providers will penalise with this fee you if you stop your pension contributions
- Exit fee: This is a fee imposed if you withdraw or transfer your savings. It can vary significantly depending on the provider. Some pension providers can make it difficult to transfer out of their pension by imposing exit fees and a tedious withdrawal process.
- Platform fee: This is another charge imposed by some providers for using their service.
- Underlying fund fee: This pays the managers of your fund and could be imposed on top of the annual management fee.
- Contribution charge: Some providers may charge you a percentage of your contribution every time you pay into your pension. This is often 2% of the funds paid in – but this charge isn’t very common in a personal pension.
But before you sign off any deals, you’ll need to be able to understand and be aware of all potential costs and how these charges could impact your pension and savings.
The amount and type of charges will vary from one provider to the next, and these are sometimes hidden in footnotes, making it hard for you to understand exactly how much you’ll be paying.
Your pension provider should provide you with a run down of the fees you’ll be charged before you apply to set up a pension.
A financial advisor can also help you understand the finer details of your annual charges and do the legwork of comparing costs of different providers to calculate which pension would be best for your situation.
How do fund management charges work?
You’ll be charged an annual fee for the admin and management costs of your pension. Depending on the provider, this could be a set amount or a percentage value of your pension funds. This charge is used to cover the cost of running your pension and investing on your behalf.
Charges can have a huge impact on your savings, but a professional pensions advisor can help ensure you aren’t bogged down with any unexpected hefty fees. A small increase in savings can make a huge difference to your investments over time.
How can I find a low-cost personal pension?
Cost isn’t the sole consideration when it comes to personal pensions. It’s important to compare the terms and investment options offered by different providers along with their fees. Shopping around the whole pensions market will ensure you get the widest possible choice and that you’ve taken the time to understand all your options before making a final decision.
If you’d like help with finding a low-cost pension that matches your retirement goals and investment requirements, make an enquiry with us – we’ll put you through to an expert advisor who can make the process of finding a low-cost pension straightforward for you.
Getting a personal pension quote
Fees and charges will vary from one provider to the next, so you’ll need to contact pension providers and compare quotes. Generally, pensions which offer more specialised investment options will have higher annual management fees than those with default or mainstream investment options.
If you already have a personal pension set up, your annual pension statement could show you how much your annual fees and costs were. Alternatively, a pensions expert can quickly search the market to compare personal pension quotes.
Speak to an expert advisor today!
Whether it’s sailing around the world, or just enjoying the peace of your own backyard, the right pension will help you on your way to your retirement dreams.
The good news is that the cost of pension charges has been decreasing over the last couple of years and there are now plenty of good options on the market for cost-efficient management of your pension savings.
If you’d like help in finding a personal pension that matches your terms at the lowest possible fees, make an enquiry or give us a call on 0808 189 0463.
A pensions advisor can make sure you are in control of your savings and are in a healthy position for retirement when the time comes.