Nearly half (48 per cent) of pension savers do not know how much they pay to their provider in charges, but are aware that some kind of fee is applied.
Interactive Investor’s report into pension transparency, published this morning (December 2), found people were unable to state the charges they paid either as a percentage of their pension or in pounds and pence.
The regulator has done lots of work on fees and charges on investment and pensions in recent years, highlighting the merits of displaying amounts in pounds and pence.
But the report found while savers could find this information in their pension documents fairly easily they tended not to understand what it represented when charges were shown as a percentage and did not have enough knowledge to know what was good value in any case.
Interactive Investor suggested costs should be displayed in pounds and pence as well as percentage, based on current pension pots.
Becky O’Connor, head of pensions and savings for Interactive Investor, said: “In any other context it would be considered totally wrong for people not to know what they are paying for something – particularly something that is so valuable and can be so costly.
“Pension providers should assume that customers are interested in both the cost of their pension and what it is invested in as a starting point."
She added: “People can’t make good decisions without information. At the moment, the barrier is that people don’t know what they don’t know.
“Once they do know the basics, like their pension is invested in funds, which invest in companies, or that the fee they are paying is higher than average, that information becomes something they can do something with.
“But we need more ‘meaningful transparency’ of information that people can understand and use to take action if necessary.”
Interactive Investor said here should also be a line included on pension statements that it is possible to move your pension to another provider.
According to the 16-page report, compiled by Opinium and Boring Money, nearly a third of the 1,000 people surveyed did not know whether they are invested in funds which de-risk as they get older.
In addition, savers knew very little about where or how their pension is invested but they appeared interested to find out.
However, Interactive Investor found most providers do not provide easy access to sufficient detail about where the money is actually invested.
The firm said those that provide an app tended to be better, but still relied on signposting links to other information which often caused confusion.
To solve this issue, Interactive Investor said it should be mandatory for providers to display the top ten holdings, with geographical and sectoral breakdowns for each company, on annual statements.
On the plus side, savers are now checking their pension pots more frequently and know what they contribute, the firm found.