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Could pension fees damage your retirement plans?

Pension fees have been in the news quite a bit lately, with ministers speaking out about the fact that many workers are likely to lose a large percentage of their pension funds simply by moving jobs. We take a look at why this happens and how it could affect your plans for a comfortable retirement.

Pension fees explained

When you start your career, a group pension scheme often seems like an excellent idea. For a relatively small annual management fee, you can have your pension needs looked after, taking the potential stresses and complications arising from this side of the financial system off your shoulders.

It's something that appeals to millions of us, yet very few of us are aware that we could be sacrificing a huge percentage of our overall pension value simply by moving jobs.

Given the fact that the average UK worker will change jobs a total of eleven times during their working life, this is obviously something that is a very real threat to the quality of life we can expect when we choose to retire.

Average annual pension management fees

The average annual pension management fees tend to be be between 0.5 per cent and 0.7 per cent, which is a relatively manageable figure by all accounts. However those of you who then leave your job for greener pastures will actually find that your fees have increased to as much as 1.5 per cent - that's a potential jump of more than one hundred per cent!

To make matters worse, it can often be an exceptionally difficult process to switch your pension fund after changing jobs, so many people simply continue with their original pension provider, losing twice as much in fees as they would otherwise have.

Is there a solution to this problem?

Right now, the issue of annual pension management fees is something of a tricky one to work around. It is certainly possible to transfer your pension, but it can be a long, time consuming and potentially expensive process, which offers little long term benefit once you have jumped through all the necessary hoops.

Fortunately though, the government is looking into alternatives which will make it easier for workers to avoid large pension fees in the future.

It is likely that some time within the next few years, we will see a new procedure implemented that will make the transfer of pension funds a lot more accessible, finally stopping the penalisation of workers who change jobs regularly.

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