Martin Lewis lays out the two types of pensions
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Pension saving is seen as the key to unlocking a comfortable retirement, but many are unaware of potential implications. A new study has shown less than half of UK adults with a pension say they “care” about the charges they pay.
The study from B&CE illustrated a detachment from pension savings which could be devastating for retirement.
The higher the charges in a person’s arrangement, the less they will get in later life.
High charge arrangements could therefore be eroding a person’s retirement dreams.
In comparison, far more Britons are interested in other financial aspects of their lives.
Some 71 percent said they paid close attention to what they pay in their mortgage, and 70 percent to their current bank account.
Of those who stated their lack of regard for pension charges, 18 percent had not got around to looking into or thinking about their payments.
The website MoneyHelper has stressed it is vital for Britons to understand the charges that apply to their scheme.
This is because the amount and type of charges can vary from pension to pension.
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The website explained: “The charges you pay matter because, while the performance of your investments can go up and down, you’ll have to pay the charges regardless.
“Over time, charges can make a huge difference to your returns.
“Even relatively small differences in ongoing costs can add up over time.”
The B&CE poll also showed 16 percent of those asked believed they do not currently have enough saved for charges to make a difference.
However, evidence indicates the opposite, and complex charges could have a serious effect.
Phil Brown, director of policy at B&CE, said: “This research is further evidence that the average saver doesn’t understand the impact that charges can have on their pension pot.
“At a time when people are naturally watching what they spend, it’s important consumers are aware of what they are paying for their pension.
“It is potentially the most valuable asset many people own.”
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With charges, it is important to weigh up what a person will pay versus what they will actually get.
Fortunately, in recent years, charges on pension schemes have been improving.
However, for those with older arrangements, action may be necessary.
It may be appropriate for Britons to consolidate pensions to avoid hefty charges.
Before taking any action, it is vital to undertake research and potentially seek financial advice on the matter.
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