Savers are potentially paying tens of thousands of pounds more if they hold a pension with a life company, research by platform Interactive Investor revealed.
The firm said that switching to a low-cost platform could save consumers a lot of money, which could then be re-invested.
The calculations are based on pension costs between Britain’s leading investment platforms and traditional life companies; such as Aviva, Scottish Widows and Standard Life.
One of the most onerous costs, Interactive Investor said, is percentage fees which increase as the retirement pot grows, whereas many platforms charge a flat fee.
Admin costs, however, seem to be consistent among both providers.
Considerable savings
The investment platform’s calculations were based on the case study of a 38-year-old person with a pension pot of £100,000 ($130,438, €110,428) invested in funds, and contributing £10,000 a year for the next 30 years to then retire at age 68.
The biggest cost comparison impact on the portfolio value at retirement was £94,800 between a Standard Life Sipp and an Interactive Investor Sipp.
The lowest was £6,400 between a Vanguard Personal Pension and the investment platform’s self-invested personal pension.
Moira O’Neill, head of personal finance at Interactive Investor, said: “Everyone’s individual portfolios and circumstances will be different, so it’s important to remember that these scenarios are a guide only.
“Our comparisons assume life company customers are engaged investors that have chosen not to go into lower cost passive funds.
“Even so, if you have your workplace pension with one of these life companies, you might well find that you are better off staying put.
“For one thing, the charges on workplace pensions are usually considerably lower than the assumptions made here, and most importantly you might lose your employer’s pension contribution, which is too valuable to jeopardise – so you should always check this.
“But if you are an engaged investor who has been actively choosing your own funds, it could well pay to shop around.”
‘Old-guard’ industry
Richard Wilson, chief executive at Interactive Investor, added: “Saving almost £100,000 with an Interactive Investor Sipp compared to a life company pension sounds incredible, but it’s a very real prospect for an above-average earning 38-year-old.
“What this research shows is what you might expect that the old-guard pension industry lines their pockets at your expense and relies on apathy and expensive TV ads to make you feel ok about it.
“What is a surprise is how massive the numbers are. This is money that should support your quality of life in retirement or help secure your children’s future.”
| SIPP | All Funds – 0.66% OCF | |
| PORTFOLIO VALUE | ||
| Provider | Funds Portfolio Value | Funds Value Difference |
| Interactive Investor SIPP | £1,104,900 | £0 |
| Vanguard Personal Pension | £1,098,500 | -£6,400 |
| AJ Bell YouInvest SIPP | £1,079,400 | -£25,500 |
| Scottish Widows Retirement Account | £1,071,500 | -£33,400 |
| Fidelity Personal Investing SIPP | £1,071,400 | -£33,500 |
| Barclays Smart Investor SIPP Account | £1,065,800 | -£39,000 |
| Aviva Personal Pension | £1,061,500 | -£43,300 |
| Hargreaves Lansdown SIPP | £1,041,500 | -£63,300 |
| Standard Life SIPP | £1,010,000 | -£94,800 |
Source: Interactive Investor
