We’ve launched a new campaign to secure better pensions after our research reveals people’s pension pots could be at risk from poor value products and high charges.
The Government’s pension reforms are set to give people more control over their pension pot. This makes it likely that more people will use income drawdown products, which allow them to take money out gradually each year.
However, our investigation uncovered several high charging drawdown products, including one that charges 2.76%. We think this is too high for the mass market and want to see a cap introduced on products sold to customers by their existing provider.
Based on a scenario of someone with the typical pension pot of £36,000, drawing down £2,000 a year, we calculate that a cap of 0.5% would leave someone in our scenario around £10,300 better off than with charges at 2.75%. A 0.75% cap would mean that they have a total of around £8,800 more over their retirement and a 1% cap would give them around £7,500 more.
Our executive director Richard Lloyd said:
'It’s right that the Government is giving people the freedom to decide how and when they access their hard-earned pension savings, but deciding how to use these savings in retirement is one of the most complex financial decisions many will have to make and one they cannot afford to get wrong.
'That’s why we want the Government to take action to secure better pensions so people have just as much protection when they take money out of their pension as when they put money in.'
You can help us secure better pensions by signing our petition.
The Government has committed to greater transparency on hidden pension charges in a win for our Hands off my Pension campaign.
We lobbied the Government for a ban on consultancy charges for work place pensions and won.