How to check your pension charges
Before you know whether you need to move your old pensions, you need to work out what you are paying now.
Please remember, SIPPs are aimed at people happy to make their own investment decisions. Investment value can go up or down and you could get back less than you invest. You can normally only access the money from age 55 (57 from 2028). We recommend seeking advice from a suitably qualified financial advisor before making any decisions. Pension and tax rules depend on your circumstances and may change in future.
Find any annual statements or original documentation for your old pension or pensions
You might have received these in paper form in the post, or via an emailed link to an online account.
If you have changed address, you might not have up to date pension statements.
If you can’t find your statements or can’t remember which companies your old pensions are with, then consider using the free pension tracing service. You will need your National Insurance number for this.
If you can remember the name of your provider, check their websites for details on how to access your pension.
You can also contact your former employer for details.
Once you’ve found the documents, you need to look for the next bit of key information…
Find out what type of Pension you have
You might already know this even without looking at your old statements, but the first thing to understand is the type of pension you have. This is important, because some types of pension you can move easily, some you can’t and for some, you might need advice first.
There are two main types of pension: Defined Contribution and Defined Benefit.
Defined Contribution pensions are a type of pension that allow you to build up a pot of money, that you then use to take an income from in retirement. It’s important to note that sometimes these can have benefits and guarantees that you need to consider when weighing up any charges you pay. They are also sometimes known as ‘money purchase’ pensions.
Defined Benefit pensions have a guaranteed retirement income or other valuable guaranteed benefits and are more complex.
Sometimes, you might find your pension is a combination of the two. These are called ‘hybrid’ schemes. These can also come with guarantees, a bit like defined benefit schemes.
The following steps only apply if you want to check the charges of a Defined Contribution pension.
Search for key charges information
A quick recap of the places you can find charges information:
Key Source 1 - The Original Documentation you were given when you started your pension
Key Source 2 - Your Pension Statement received each year from your pension provider
Key Source 3 - Any Letters or Emails notifying you of changes in charges & fees
Key Source 4 - Online Access that allows you to view pension information and transactions
Key Source 5 - Provider Websites that detail charges information about your specific pension product.
Information about the charges you are paying should be given. They might be expressed as percentages or in pounds and pence. Remember that if your provider charges a percentage, the amount coming out each year will vary according to your pot size.
Good to know:
Pension providers have been operating pensions for many decades. and while even modern pensions can have higher than expected charges many older pensions have significantly higher fees. If a provider gives details of general fees on its website, these still might not be the fees you personally are paying.
Identify each of the charges you pay
Reading through each of your key information sources identify the different charges that are taken from your pension. Understand how these are calculated and try to decide if each charge is a charge levied by your pension provider, or one from the providers of the underlying investments, or both. This bit isn’t always straightforward. The names for different types of charges are not always consistent between different providers, making it tricky to know whether you are comparing apples with apples. But there is one main difference in charge types you need to know about:
The difference between Provider & Investment Charges
When comparing pension charges, it is very important to understand that the overall amount you pay is made up of charges from different sources. First, there are charges added by your pension provider. Then, there are separate charges imposed by the provider of the investments that make up your pension. :
Pension provider charges: these are taken to pay for running and administering your pension. They vary significantly from one provider to another. 'Providers’ include ii, Aviva, Standard Life, Hargreaves Lansdown, Scottish Widows, Aegon, Royal London
Investment provider charges: these pay asset managers for investing your pension. They also vary and depend upon the type of investment you choose and the investment provider. Examples of investment providers are Blackrock and Baillie Gifford.
Good to know:
- Some asset managers are also providers. So your pension and investments could be provided by the same provider or different providers. As an example, you could have a pension provided by Aviva and have your pension pot also invested in an Aviva Fund or you could have your pension provided by Aviva and via their service choose to invest your pension pot in a Vanguard Fund.
- Many charges are described and calculated as a percentage of the value of your pension. Sometimes the same percentage is applied to all of your pension pot. But sometimes, different percentages might be applied to different parts of your pot as it falls within different value bands / tiers.
- You might also pay one-off charges for things like withdrawing money from your pension or setting up a drawdown facility.
Check how these charges compare
Once you have worked out what you pay in charges, the next thing you need to know is whether these charges are relatively good value For this, you’ll have to check out a few other providers. Remember that converting percentages into pounds and pence can make the charges comparison easier. It can also help to think about how much you pay each year or each month.
Good to know:
- Most providers offer access to a wide variety of investments, many even give access to the same underlying investments, but it’s good to check the investment charges are also the same with different providers.
- When comparing pension charges look out for charge refunds or rebates that might apply or any other benefits or guarantees that could mean despite higher charges you are still receiving good value for money.
- Be aware that your provider might charge exit fees, there could also be a difference between the value of your pension pot and the transfer value of your pension. It could be less. This is common with older pensions.
If in doubt, check with your pension provider
If you are in any doubt about your charges or any other features of your pension it is always a good idea to contact your provider directly. They should be able to help you understand the types and level of charges you pay, together with any other features of your pension. Follow this link for an example request template that you can use and alter for your request.
How can Pension Wise help?
If you have a defined contribution pension scheme and are 50 or over, then you can access free, impartial guidance on your pension options by booking a face to face or telephone appointment with Pension Wise, a service from MoneyHelper.
If you are under 50, you can still access free, impartial help and information about your pensions from MoneyHelper.
The ii SIPP is aimed at clients who have sufficient knowledge and experience of investing to make their own investment decisions and want to actively manage their investments. A SIPP is not suitable for every investor. Other types of pensions may be more appropriate. The value of investments made within a SIPP can fall as well as rise and you may end up with a fund at retirement that’s worth less than you invested. You can normally only access the money from age 55 (age 57 from 2028). Prior to making any decision about the suitability of a SIPP, or transferring any existing pension plan(s) into a SIPP we recommend that you seek the advice of a suitably qualified financial adviser. Please note the tax treatment of these products depends on the individual circumstances of each customer and may be subject to change in future.