We’ll get to the point: There’s no way around it, you’ll have to pay fees. And more than one set. With a pension comes a pension provider, a fund manager, and, if you get advice from a financial advisor you’ll have to pay them as well. Plus, there may be hidden one-off fees you'll need to be aware of. Pens at the ready…

Pension Provider Fee a.k.a. Annual Management Charge (AMC)

This covers the pension set-up, ongoing admin and providing you with account information including annual statements. The good news is that the government capped the fee on workplace pensions at 0.75%. This means for every £10,000 in your pension the most you’ll pay is £75 a year. If you open a pension outside of your work you can find even lower provider fees of 0.45% or less. 

Fund Management Fee a.k.a. Ongoing Charges Figure (OCF) 

This fee covers the manager’s expenses and expertise. It will differ between funds but you'll find charges between 0.10% to 2.0%. That means £10 to £200 a year for each £10,000 invested. You'll find tracker (or passive) funds where no manager is required have the lowest fees whereas riskier funds, which aim to bring you higher returns, will have the highest fees. 

Financial Advisor Fee

This covers advice given to help choose your fund and guidance on how much you should deposit each month to achieve your retirement goal. Depending on the advisor you may pay a one-off fee for some initial advice. Ongoing advice fees range from 0.5% to 1%, so that's £50 to £100 a year for each £10,000 invested. We have a guide for this. 

One-off charges

These include fees for entering or exiting a fund, switching your fund, or transferring your pension to a new provider. Some providers charge these fee and others don’t. Always ask!

So what’s the damage?

Added all together (bar one-off charges), total fees are from 0.50% to 4.0% of your pension pot every year. That’s £50 to £400 per year for each £10,000 invested. Now, we don’t want to scare you, but consider the fees over the years as your pot grows. By the time you're 65 you may have a pot of £300,000 and 1% of this is £3,000, let alone the fees charged in the years before – we’re talking tens and thousands. Choosing a pension with lower fees can keep a lot of its value in the long-run. 

Yikes! How can I pay less?

If your pension is via work you usually won't get to choose the provider but you should have a choice of funds. Here you can weigh-up the fund management cost against the fund's performance, as well as other factors. Pension fees are a sizable chunk paid each year over a long time so you should spend some time working out how to reduce them by comparing fees between providers, funds and advisors.  


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