Auto-enrolment means almost everyone is now in a workplace pension. But not all schemes are created equal. High fees, poor fund choices, and opaque charges can silently erode your retirement savings by tens of thousands over a career. Here is how to check if yours is costing you.
What fees should you be paying?
The government caps default fund charges at 0.75% per year for auto-enrolment schemes. But many good schemes charge far less:
- Good: 0.15–0.30% (e.g. Nest, large employer master trusts)
- Acceptable: 0.30–0.50%
- Expensive: 0.50–0.75%
- Red flag: above 0.75% or with additional transaction/exit charges
A 0.5% fee difference on a £200,000 pot over 20 years costs you approximately £20,000 in lost growth.
How to find your fees
- Check your annual pension statement
- Log in to your scheme's online portal and find the fund factsheet
- Look for the "Annual Management Charge" (AMC) or "Total Expense Ratio" (TER)
- Ask HR or your pension provider directly
Are you in the right fund?
Most people are in the default "lifestyle" or "target-date" fund. This automatically reduces risk as you approach retirement. However:
- If you are decades from retirement, a higher-equity fund may perform better over time
- If you have multiple old pensions, they may be in outdated funds with high charges
- Some defaults are overly conservative for younger savers
Should you transfer to a SIPP?
A Self-Invested Personal Pension (SIPP) gives you full control over investment choices and typically lower fees. Consider transferring if:
- Your scheme charges above 0.5% and you have a significant balance
- You want access to specific funds (e.g. global index trackers at 0.1%)
- You have multiple old pensions to consolidate
Do not transfer if your current scheme has valuable guarantees (defined benefit/final salary) or if your employer contributes to the specific scheme only.
The tax relief is still worth it
Even in an expensive scheme, the tax relief on contributions still makes pensions worthwhile. A 40% taxpayer contributing via salary sacrifice gets an immediate 42% boost — this more than offsets even the worst 0.75% annual charge in the short term. The pension tax relief calculator shows the exact saving for your salary level.