Picking the wrong pension investment with the same provider can cost retirement savers more than £30,000 in administration charges, according to a new study.
Over 55s can lose thousands of pounds in fees and charges on some pension plans, while others keep the money in their fund, according to new research by Money Management magazine.
The findings reveal the true effect of pension fund charges – and reveals a wide margin between the cheapest and most expensive providers.
Providers are already under fire from consumer groups and trade bodies, like the National Association of Pension Funds, for masking high charges on paperwork and statements.
The study found that contributing £200 a month for 25 years on commission-free terms with Aviva’s balanced managed fund resulted in a £146,863 pension pot – while Axa’s Elevate plan returned £31,705 less on the same terms, with a fund of £115,158.
The difference in fund values is pocketed by Axa as fund management and administration charges.
The research also looked at some alternative contribution options and the impact provider’s fees had on final pension amounts.
Aegon was the top rated company for investing £500 a month over 25 years, with a £370,599 fund – while Axa’s Elevate again came last with £290,082.
A single contribution of £50,000 over 25 years growing in a balanced managed fund at 7% per year would generate £211,354, says Money Management.
Axa Retirement Wealth retuned £36,646 more, while the negative impact of charges by Axa Elevate, skimmed £46,096 in charges – amounting to 21.8% of the fund – leaving a retirement saver with just £165,258 from the same provider.
A recent report to the Treasury accused pension providers of siphoning an average 3.2% from each pension fund in charges – adding up to more than £62 billion each year, regardless of investment performance.
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