Millions of UK workers are losing substantial sums from their retirement savings by making additional pension contributions without receiving employer matches, while still paying high fees.
New research from InvestEngine reveals that 2.8 million workers are at risk of eroding their retirement funds in this way.
These workers continue to pay extra into workplace pensions despite receiving no additional employer contributions, whilst still being subject to high fees that significantly diminish the value of their retirement savings over time.
The research shows that three in 10 workers with defined contribution pensions – equivalent to 4.2 million people – say their employer does not offer to increase their contributions, even when employees increase their own.
Analysts are warning that pension savings are at risk of being “eroded”
GETTY
Despite this lack of employer matching, 30 per cent of workers in this position still choose to make additional contributions.
This means a significant number of savers are missing out on potential employer top-ups while continuing to pay high fees on their extra contributions.
Workers who put additional pension contributions into a lower or no-fee personal pension could find themselves significantly better off at retirement.
High fees can dramatically erode pension pots over time. Someone saving £400 monthly with a 0.75 per cent annual fee would be over £142,000 worse off after forty years compared to a no-fee arrangement.
Personal finance experts say workers should ask their employer if such a scheme is available and consider increasing their pension contributions to take advantage of the NI and tax savingsGettyThis substantial difference highlights how seemingly small percentage fees can have an enormous impact on retirement savings over the long term.
The research also found that one in five workers have a personal pension, such as a SIPP, contributing an average of £226 monthly. However, even with these alternative arrangements, savers aren’t immune to fee erosion.
Paying average account fees from top providers on this amount over forty years would still leave savers over £35,000 worse off. This figure could be even higher when monthly and trading fees are factored in.
Last year, InvestEngine removed fees on its self-invested personal pension to help people retain more of their retirement savings. This figure could be even higher when monthly and trading fees are factored in.
When asked about priorities in pension investments, a PensionBee survey found that more than half (52 per cent) of respondents prioritised maximising long-term returns and ensuring low fees and transparency.
In contrast, only 15 per cent prioritised investing in UK PLC, suggesting the Government’s recent calls to direct pension savings into UK businesses are not resonating with most savers.
LATEST DEVELOPMENTS:
Britons are looking to manage their pension savings better
PEXELS
Meanwhile, 14 per cent placed the highest importance on keeping pension savings in low-risk investments.
A further 18 per cent of respondents preferred a balanced mix of all options rather than selecting a single priority.
Clare Reilly, Chief Engagement Officer at PensionBee, commented on these findings: “These findings highlight that UK pension savers want stability and transparency, not speculation. The majority are looking for steady, reliable growth, with most favouring a balanced, moderate-risk approach.”
“This demonstrates a clear preference for managing risk without sacrificing long-term returns. Savers want the confidence that their pension is growing steadily over time, and they demand transparency to ensure they fully understand where and how their money is being invested.”
