Pension fees and charges

Most workplace defined contribution pensions include this charge, as well as pension providers for personal pensions. It covers the cost of running your pension scheme, as well as investing the money you pay in contributions.

These cover the cost of administration and are usually included in the annual management charge. Depending on when they were created, some pension savings plans might charge a separate policy fee. This will be shown on your statement.

In the past this was called the total expense ratio, this covers the day-to-day costs of running an investment fund. It’s usually taken straight from your funds, so it’s already been taken into account when you look at performance reports in annual statements.

Also called platform fees, these cover the administration of your pension and are usually charged as a percentage of the money you’ve saved. How service fees are applied varies between providers, but generally they’ll be one of two options:

• Stepped charges applied to the total amount of your fund
• Tiered charges applied to parts of your fund, with each having its own pricing band

As the name suggests, these are the costs linked with buying, selling, lending or borrowing investments. Your provider or pension manager will keep them under review, as they could affect investment gains and the value for money you get.

These apply when buying or selling certain investments. They might also apply if you’re making a contribution and investing or switching from one investment fund to another. Some providers might apply a fee every time you buy or sell, sometimes as a set amount and sometimes as a percentage of your investment.

Some funds have two prices — one to buy in and another for selling out. The bid/offer spread is the difference between the two prices. It includes the initial charge plus any costs involved in making the investment. Fees are usually a percentage of the contributions you’ve made or switches between funds.

This tends to apply to older pensions, where your contributions have been invested in initial or capital units for a period set out in your contract. These carry higher annual management charges. After the initial period, your contributions will be used to buy accumulation units, which have lower charges.

You should be able to see if this applies to you by looking at your annual pension statement. It should show how many of each type of unit you have.