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Are pension fees deflating your retirement savings?
These charges can go unnoticed but have a big impact on your overall pot
More than eight in 10 pension savers don't know what they're paying in pension fees, according to research from investment platform Interactive Investor.
This is a worrying trend, as high pension fees could be silently wiping out tens of thousands of pounds from your retirement savings over time.
Here, Which? explains how pension fees work, how they can impact your savings and four ways you can keep track of them.
What are pension fees?
When you pay into a pension, your provider typically invests your money to help it grow.
How fees affect you depends on the type of pension you have.
- Defined Benefit Pension: With this type of pension, the investment performance doesn't affect you. Your employer guarantees a specific amount for you to receive in retirement, so you usually don't have to pay any fees.
- Defined Contribution Pension: With this type of pension, investment growth directly impacts how much money you'll have in retirement. Your pension provider charges an annual management charge (AMC) as well as other fees to cover the costs of managing and investing your money. These fees cover things such as professional fund management and other administrative costs.
Your pension provider will usually take any charges out of your pension pot automatically, rather than send you a bill to pay, so it's easy to see why pension fees can go unnoticed.
If you have a workplace pension through auto-enrolment, your fees are capped at 0.75% if you stay in the default fund. However, if you switch to a different fund, they could be higher.
Those who have pension schemes that pre-date auto-enrolment – which launched in 2012 – can also be charged extra.
- Find out more: pensions auto-enrolment explained
How do pension fees impact your savings?
If you earn the UK's average salary of £35,000 and contribute £250 per month into a pension from the age of 25 to 66, the fee you pay can wildly change the pot you end up with, according to research from investment firm Vanguard.
You could under these circumstances accumulate £465,000 by the time you reach retirement age, assuming a 6% annual return and a 0.5% annual fee.
However, if the annual fee charged was 1%, your pension pot’s value would shrink to £406,000 – £59,000 less. While an annual fee of 1.5% would reduce the total saved to £355,000 - £110,000 less.
| With a 0.5% annual charge | With a 0.75% annual charge | With a 1% annual charge | With a 1.25% annual charge | With a 1.5% annual charge | |
|---|---|---|---|---|---|
| £465,000 | £434,000 | £406,000 | £379,000 | £355,000 | |
| Difference compared to a 0.5% charge | n/a | -£31,000 | -£59,000 | -£86,000 | -£110,000 |
Assuming a monthly contribution of £250 into a pension from 25 to 66 and an average annual return of 6%.
Source: Vanguard
Four ways to keep on top of pension fees
So how do you know if pension fees are eating away at your hard-earned retirement savings?
Use our tips to keep track of fees and take action when you spot them.
Review your pensions regularly
Regularly reviewing your pension savings is one of the most effective ways to ensure you're not paying more in fees than you need to.
Fees cover the costs of managing/investing your money to get good returns on your retirement savings. If a fund is consistently underperforming, then the fees you're paying might not be providing good value for money.
Regularly reviewing these allows you to check your pension fund's performance and switch to a better-performing - or lower-cost - alternative if it’s not working for you.
Older pension plans also often have higher fees than modern ones, and by checking your annual statement, you can see if these charges are too high.
- Find out more: how to get pension advice and guidance for your retirement
Check for hidden fees
While a provider might advertise a low annual management charge, there could be other costs. Look closely at your pension statement for fees related to transactions, administration, or platform usage, as these can add up over time.
Some older pensions may also charge inactivity fees if you stop contributing, which could make it worthwhile to transfer.
- Find out more: Pension options: what can I do with my pension pot?
Compare and switch providers
Different providers charge different fees, so moving your savings can help you cut costs.
Even a seemingly small difference of 0.25 or 0.5 of a percentage point on fees can save you tens of thousands of pounds over a typical working life.
However, there are many things to think about before moving your savings. Firstly, you will need to find out if your pension pots have any special features or benefits you could lose out on if you move to a new provider. You should also check if there are any exit charges.
- Find out more: best investment platforms
Consolidate old pensions
If you have accumulated a few different pension pots - such as workplace pensions - you may find you could save money by consolidating them into one, under one provider. This cuts the number of providers you are paying management charges to.
As mentioned before, it's important you do your homework before consolidating your pension pots.
If you've got small pots - worth under £10,000 - it's not always beneficial to consolidate. That's because you can cash in up to three of these smaller pension pots without triggering the Money Purchase Annual Allowance (MPAA). This reduces the amount you can save into a pension and receive tax relief on from £60,000 to £10,000 per year.
- Find out more: best annuity rates September 2025
