Common pension mistake could force many to work years longer
It has been described as a ‘multibillion-pound issue’
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Your support makes all the difference.Some pension savers could be forced to work years longer due to a common mistake.
Those saving could have to make up the costs of transferring from lower-charging workplace pensions into higher-cost options, a provider has warned.
The People’s Partnership, provider of the People’s Pension, called for action to ensure that people considering making transfers have the information they need to compare their options.
It carried out analysis based on the volume of transfers out from the People’s Pension in 2023 and the average size of pots being transferred.
Based on transfers last year, as much as £1.2 billion of savings could be at risk from ill-informed transfers, over the course of people’s pension savings journey to retirement, the provider estimated.
The People’s Partnership warned this could become a “multibillion-pound issue” once pensions dashboards, which are in the pipeline, eventually go live.
The dashboards will enable people to see all their pension pots in one place online, potentially making it easier to move savings around.
Patrick Heath-Lay, CEO of the People’s Partnership, said: “It’s incredibly worrying that our modelling shows more than a billion pounds is potentially lost due to people transferring to higher-charging pension schemes.
“Given market activity around transfers is escalating, this could easily cost consumers billions a year more once commercial pension dashboards are introduced.
“With adequacy of saving levels still a significant factor to future pension policy success, this turbo-charging of the transfer market will ultimately be to the consumer’s detriment, meaning we need to act now to ensure that people have the information they need to compare their options when considering a transfer.”
A Department for Work and Pensions spokesperson said: “We are committed to ensuring people have the right support and information they need to make informed choices about their financial futures. This strikes the right balance of providing vital protections as well as freedom of choice in how to use their pension savings.
“Our Value For Money Framework will mean that savings are invested well, they are not being eroded by high charges and that schemes are helping members make the right decisions whilst contributing.”