Experts warn about pension mistake that could cost you £40k

Brits have been warned against making one common pension mistake that could end up costing over £40,000. The majority of UK pension savers, a whopping 83%, have "no idea" what they're paying in pension fees, according to new research from Interactive Investor. This may be leading millions of vulnerable people to poor retirements, as they pay over the odds for their pensions.

Experts said it could well be over £40,000 that they are missing out on. Antonia Medlicott, Founder & MD at London-based Investing Insiders, said many just don't know what they are paying in fees. She said: "There is a big knowledge gap when it comes to understanding pensions. Pension fees, in particular, are very poorly understood.

"And that means far too many people are paying more than they need to be - and losing out on precious retirement income as a result.

"Differences of less than one per cent might not seem worth worrying about. And over the course of one year, you could only be talking about relatively small amounts.

"But it's when you start compounding those differences over the lifetime of a pension that you see how important fees are.

"Let's say you have £50,000 invested for 30 years and growing at 5% per year: With 0.5% annual fees, you'd end up with £187,265 at the end. With 1.5% fees, you'd only end up with £140,340. That's a whopping £46,925 difference.

"Those kinds of figures could mean the difference between the retirement of your dreams and one plagued by money worries."

Pension fees are charges that cover the administration and investment costs of your pension plan, such as the annual management charge (AMC), fund charges, and platform fees.

These fees are deducted from your pension pot and can be a fixed amount or a percentage of your savings.

An AMC is a yearly fee that covers the core costs of managing your pension and its investments. It's often expressed as a percentage of your pension pot and is usually deducted on a daily basis.

Fund changes are fees associated with the specific investment funds your money is in. These can include ongoing charges figures and might be higher for more specialised funds.

Finally, platform fees are charged to cover the costs of running the online platform or the overall administration of your pension, like customer service or app access.