Lazy pension pots are costing savers billions in wasted fund and management charges every year.
New research reveals savers are spending at least £2 billion a year on unnecessary financial management charges.
A report from independent pension comparison service Profile Financial also revealed £180 billion is languishing in overcharged schemes.
Shockingly, the findings also showed six out of 10 savers do not know how much they are paying fund managers and just over 40% of retirement savers have never spoken to a pension professional about their investments.
According to the research, the average annual fee paid on a pension pot is 1.47% – but as some providers only charge 0.34%, loyalty to a provider is expensive for many savers.
Switching providers saves cash
A 35-year-old saver with a £22,000 pension paying the average fee of 1.47% would save £9,000 just by switching to the market-leading low cost provider.
The company also suggests that more than a third of retirement savers have no idea how they pension investments are performing nor how risky they might be.
Simon Vella, of Profile Financial, said: “For most people, their pension is their biggest financial asset aside from their house. But while everyone knows the value of their property, and how much the mortgage costs each month, very few people know the total in their pension and how much they pay in fees each year.
“The fees are scandalous, but the issue actually goes way beyond this. Having lazy pension pots can also mean your savings are not invested properly to match your expectations, and it can mean you won’t be able to take advantage of new pensions freedoms when you want to retire.”
DIY investors get better results
Meanwhile, a separate survey by Better Finance claims investors get better results managing their own savings rather than putting cash into a pension.
The research scrutinised data from across the European Union for the past 16 years and found that the long-term performance of savings was not tied to the performance of financial markets.
Better Finance said high charges for pensions and other financial packages meant savers missed out on returns.
“Fees and commissions, often complex and opaque, substantially reduce the performance of pension products, especially for personal ‘packaged’ pension products. Taxes further reduce returns on investments,” Better Finance said.
The firm also warned returns are likely to drop even more while official interest rates are anchored at record lows.