Pension Charges Explained: What You Pay and How to Pay Less
You never get a bill for your pension. The fees come straight out of the pot, which is why most people have no idea what they pay. The average workplace scheme member pays about 0.48% a year (DWP Pension Charges Survey), but older pensions can quietly charge double that. Over a working life, the gap between a cheap pension and an expensive one can be worth tens of thousands of pounds.
What you are actually paying for
If you have a defined contribution pension (the kind with a pot), your provider invests your money and charges for the work. The main fee is the annual management charge (AMC), a percentage of your pot taken each year. A 0.5% AMC on a £40,000 pot is £200 a year.
Depending on the scheme, you might also pay:
- Platform or administration fees, for running the scheme, the app and the paperwork.
- Fund charges, for the investment funds your money sits in, sometimes shown as an "ongoing charge figure".
- Transaction costs, the cost of buying and selling investments inside the funds. These sit outside the headline charge, so the true total is usually a little higher than the number on your statement.
- One-off fees for things like transfers or taking money out, though these are now rare on modern pensions.
One type of pension charges you nothing: a defined benefit (final salary) pension. Your employer carries the costs because your income is guaranteed either way.
The rules that protect you
The 0.75% charge cap
If you were put into your workplace pension automatically, the default fund your money sits in is capped at 0.75% a year. The cap has applied since 2015 (source: GOV.UK charge cap guidance). It covers management and admin charges but not transaction costs. Most big schemes charge well under it.
- Small pots are protected from flat fees. Since April 2022, providers cannot take a flat fee from an auto-enrolment default pot worth £100 or less (source: GOV.UK).
- Exit fees are capped too. Since March 2017 the FCA caps early exit charges on personal pensions at 1% for anyone old enough to access their pot, and personal pensions started after that date cannot have exit fees at all.
The catch: these caps only cover auto-enrolment default funds and newer contracts. A personal pension sold in the 1990s sits outside all of them.
What counts as cheap, normal and expensive
| Total annual charge | Verdict |
|---|---|
| Under 0.4% | Cheap. Typical of large modern workplace schemes. |
| 0.4% to 0.75% | Normal. The average auto-enrolment member pays about 0.48%. |
| 0.75% to 1% | Expensive for a workplace scheme. Common on older personal pensions and full-service SIPPs. |
| Over 1% | Worth investigating. Usually an old pension or an adviser fee stacked on top. |
Older pensions carry quirks that push costs up further: some charge more on money paid in during the early years (called initial units), and some raise their fees if you stop contributing. If you have a pension from an old job that you have not looked at in years, its charges are the first thing to check, and our guide to finding and combining old pensions covers what to do next.
If you run your own SIPP, you pay a platform fee plus fund charges. Kept simple, with one low-cost fund on a cheap platform, the total can come in around 0.3% to 0.5%. Pick expensive funds and it can pass 1% without you noticing.
What half a percent actually costs you
Percentages this small look like they cannot matter. Compounding says otherwise. Take someone with a £30,000 pot who pays in £250 a month for 30 years, with investments growing at 5% a year before charges (an illustration, not a promise):
| Annual charge | Pot after 30 years | Lost to charges vs 0.3% |
|---|---|---|
| 0.3% | £311,500 | – |
| 0.48% (average) | £299,100 | £12,400 |
| 0.75% (the cap) | £281,700 | £29,800 |
| 1% | £266,500 | £45,000 |
Same money in, same investment growth. The only difference is the fee, and it quietly eats a five-figure sum. This is why charges are the one part of your pension always worth checking: you cannot control markets, but you can control what you pay.
See what your pot could grow to
Our free calculator shows what your pension could be worth at retirement, and what changing your contributions would do. No sign-up, nothing stored.
Try the calculator →How to find out what you pay
- Check your annual statement or provider app. Look for "annual management charge", "ongoing charge" or "total costs and charges".
- If it is not clear, ask the provider directly: "What is my total annual charge, in pounds, including fund and transaction costs?" They have to tell you.
- Do it for every pension you hold. Most people have several pots from old jobs, and the oldest ones are usually the most expensive.
Paying less, without getting caught out
If one of your pensions is expensive, moving it to a cheaper provider is usually simple and free. Two checks first, though. Some older pensions carry valuable perks, like a guaranteed annuity rate or a protected early retirement age, that vanish when you transfer. Ask the provider "will I lose any guarantees or protected benefits if I transfer?" before moving anything. And your current workplace scheme is often already the cheapest home for your money, because employers negotiate bulk rates, so compare before assuming a shiny new provider wins. Free guidance is available from MoneyHelper if you are unsure.
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This article is for general information only and does not constitute financial advice. Charge figures are from the DWP Pension Charges Survey, GOV.UK charge cap guidance and FCA rules, correct as of July 2026. Growth figures are illustrations only, not guarantees; investment values can go down as well as up. If you are unsure about any pension decision, use the free government-backed guidance at MoneyHelper or speak to a financial adviser regulated by the Financial Conduct Authority (FCA).