Failing to get good deals on pension fees and annuities could mean an extra five years at work to get an equivalent pension, according to the National Association of Pensions Funds and the Pensions Policy Institute.
A report by the two organisations, published today, says poor choices on fees and annuities could cut pension income by up to 24 per cent. It says a man earning a median wage all through his life, starting at £20,000 at 25 years old, could retire three years earlier if he negotiated an occupational pension with a long-term charge of 0.3 per cent rather than paying the 1 to 1.5 per cent maximum fees charged through a stakeholder pension.
The NAPF bills itself as the “leading voice” of workplace pensions in the UK and is currently working on a project to increase transparency of pension charges.
The report adds that by failing to shop around for an annuity, a median earning man could reduce his pension income by 12 per cent, equivalent to an extra two years of contributions.
NAPF chief executive Joanne Segars says: “High charges can eat away at a savings pot and both workers and employers should try to keep them down. The annuity system can seem complicated but savers can help themselves by shopping around to get the best possible rate.
“People who do not get the best out of their pension could end up stuck at work for years longer than they planned. Getting a good deal on charges and annuities can mean the difference between enjoying retirement and spending years more at the desk.”
The report suggests retirement income can be trebled by paying into a pension from age 30 instead of 40, increasing employer and employee contributions each by 1 per cent, working for an extra year, paying lower charges and getting the best annuity on your whole pot rather than taking a tax free lump sum.