If you have a workplace pension, your employer negotiates the charges on your behalf.
Every workplace pension must have a default fund and the government has set a maximum charge of 0.75% of your fund each year. This charge cap applies only to the default fund in workplace pensions into which employees are automatically enrolled.
Alternatively, some workplace pension schemes, such as the government’s Nest scheme have a dual charge – in Nest’s case 1.8% of every regular payment in plus 0.3% of the fund each year. Nest says that this is equivalent to about 0.5% on average. The charge covers everything – administration and investment and there are no exit charges.
Many employers have negotiated charges less than the 0.75% charge cap, and employees will typically pay between 0.45% and 0.5% a year on average if they invest in the default fund.
Although you can’t control workplace pension charges, some employers have a forum or committee that considers issues such as value for money, so you may be able to make your voice heard.
All workplace pensions also have either a board of trustees or an independent governance committee. These boards and committees are there to look after your best interests, including whether the charges represent good value for money.
As well as the default fund, workplace pensions usually provide a range of other funds into which you can invest your savings, but these may be more expensive than the default fund.
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