More than £1bn lost in pension fees transferred from workplace schemes

Savers are losing more than £1.2bn of their retirement funds each year by inadvertently moving their pensions from workplace schemes to ones with higher charges, according to a new study.

Hidden fees and complicated charges in pension funds are wiping out up to a fifth of retirement savings, provider People’s Partnership warns.

The number of savers who moved their pension funds reached a record 1.2 million last year.

Most people believe they are doing the right thing by consolidating their retirement savings into one place to make it easier to track and manage.

But the People’s Partnership, which manages the pensions of one in four private sector workers, worth a total of £28bn, warns that tens of thousands of savers are moving their pensions into schemes with higher fees every year.

They may have to work at least three more years to cover the gap caused by their decision to transfer, he added.

The number of people moving their pensions from work has risen by 50 per cent in the past four years, according to projections by the pensions group based on its own figures and data from the City regulator.

This pension error could worsen the already worsening prospects for future pensioners.

On Tuesday, the pension industry warned of a looming retirement crisis.

A report by pension provider Scottish Widows has found that around a million more people than a year ago are at risk of not achieving a minimum standard of living in retirement.

The People’s Association says workers are moving their pensions from its plans (which have fees as low as 0.2 percent a year for older investors) to others that charge up to 0.9 percent or even 1 percent a year.

Since 2015, charges on default occupational pensions, in which employees are automatically enrolled, have been capped at 0.75 percent.

However, independent pension groups where savers can transfer their money may charge more.

Hidden fees on pension transfers can wreak havoc on retirement savings.

A seemingly small difference in rates can cost tens of thousands of pounds.

For example, transferring a £50,000 pension pot from a provider charging 0.4 per cent to one charging 0.75 per cent could result in a shortfall of more than £70,000 over a 30-year career.

Savers may not realise they are moving their funds into more expensive options as pension charges are often complex or poorly explained, and so can be difficult for the average saver to assess.