The Government’s radical pension reforms will soon come into effect and people will have more options than ever on how to use their pension pot. But will this mean everyone will get a good deal on their pension savings?
Until now the pensions market hasn’t had the best track record for treating consumers fairly. From April, you won’t have to buy an annuity to access your pension savings, so it’s likely that more will use income drawdown products. These allow you to take your money out gradually each year.
However, even though you’ll have more freedom on how to access your hard-earned pension savings, our research found that there are poor value products and high charges waiting around the corner.
Poor value pension products
We found one provider charging 0.5% more than another for investing in the exact same fund. Another provider’s charges ranged from 0.44% to 1.24% for very similar funds, which would make a significant difference over the course of someone’s retirement.
We also uncovered several high charging drawdown products, including one that charges 2.76%. The difference between that product and one charging just 0.5% would mean you’d lose out on more than £10,000 over the course of your retirement if you had a pension pot of £36,000.
What do we want?
Back in 2013, we campaigned for a charge cap on workplace pensions. A cap of 0.75% will come into effect in April, but we think people should have just as much protection when they take money out of their pension as when they put money in. That’s why we want:
- A Government-backed provider to ensure everyone can access a good value, low cost product,
- A charge cap for default drawdown products,
- Better safeguards for savings in schemes that go bust.
We’ll be putting pressure on the next Government to build on the pension reforms and take forward our asks. If you want everyone to be able to make the most of these pension changes, sign our Better Pensions petition.