Pension blind spots cost Britons average of £120,000 in retirement | Personal Finance | Finance

Britons could be losing a significant amount of money which could boost their retirement prospects through a lack of understanding of investment choices and pension fund fees, according to a new report by interactive investor. The report showed an alarming number of savers are in the dark when it comes to their pensions.

The platform calculated that a typical pension pot could end up around £120,000 lower on retirement.

A staggering 77 percent of people do not know how much they pay in fees for their pension, according to research by Opinium on behalf of interactive investor.

This increases to 90 percent among the over 55s.

A third of respondents said their pension was invested in low-risk funds, while another third did not know the risk level of their pension.

READ MORE: State pensioners may see sum affected if they were in a workplace pension

She said: “It’s time people took control over what their pension is doing and how much it is costing.

“Someone with the average pension pot size of £86,232 could save £259 a year on average, over their career, by moving their pension from a provider with typical charges of 0.48 percent to ii’s Pension Builder, which costs £12.99 a month.”

A total of £259 a year works out as £21.58 a month.

Ms O’Connor continued: “That’s £21.58 a month an average worker could be saving each month to help pay for a multitude of other living costs – and you are still getting the all-important investment growth within your pension pot.

“By comparison, the typical saving by switching broadband provider is £143 a year – yet we hear far more about switching broadband than moving pensions.”

Ms O’Connor warned Britons looking to move their savings to make sure they are not losing any valuable benefits first.

Some older life company pension plans, particularly ones accessed through work, come with an option to withdraw more than 25 percent as a tax-free cash lump sum or with generous guaranteed annuity rates.

Savers could also boost their pension pots significantly by moving their money from conservative, low-risk investments to higher growth funds.

interactive investor calculated the extra growth generated by someone moving from a low-risk fund with average annual returns of two percent to a higher growth fund with an average four percent annual return is an estimated £110,000.

As the cost-of-living crisis continues to surge, interactive investor also urged people to check their monthly expenditure to see if they could cut their bills and open up room to save for the future.

This could be done by cancelling unwanted subscriptions to services such as Netflix, Amazon Prime Video and Disney+.

They added that it could be worth shopping for supermarket-own brands, pausing unused gym memberships and switching utility providers.

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Divyansh Singh

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