The research, conducted by the provider of The People’s Pension, which provides the pension to 6.5 million people across the UK, surveyed 1,000 defined contribution (DC) members aged between 18 and 65 who had consolidated a DC pension in the last two years, without the assistance of a financial adviser. It found the primary factor which prompted members to transfer their pension was to “streamline their finances” as 36% cited financial simplification as the reason for their decision to transfer, while a further 25% said they had concerns about losing track of their finances.

People’s Partnership found the vast majority of respondents were not driven to consolidate their pension based on the prospect of lower fees or better investment performance –adding it found nearly three-quarters (72%) who had recently conducted a transfer were not aware of what the fees for their old pensions were or what the charges were for their new pension.

Main reason for consolidation

It also found under one-tenth (9%) of respondents said fees or charges was the primary factor for opting to consolidate their pension, while 16% cited improved investment performance. The research also noted while three in ten respondents were aware of how much they were paying in terms of fees and charges, while a further 11% said they did not think their pension had any fees or charges.

Awareness of fees and charges

People’s Partnership analysis of a 30 year old worker earning a salary of £30,000 who moved a pension pot worth £10,000 from a provider charging 0.4%, to one charging 0.75% would leave them £32,834 worse off when they reached retirement at 67 years old. Similarly, if they moved a £50,000 pot they would lose £59,523 from their retirement savings.

In addition, if the same worker has a salary of £45,000 and transfers a pension worth £50,000, it would leave them £72,689 worse off in retirement. These findings were calculated based on a 30-year old who would begin to take their pension in 2061, based on total contributions of 8% with wage inflation at 3.5% and investment returns are at 5%, split between 2.5% return and 2.5% inflation.

People’s Partnership said its research highlighted a need for the industry to be more transparent about fees and charges and should provide the key information to savers looking to conduct a pension transfer, to safeguard them against making decisions which would have an adverse effect on their finances.

Chief executive Patrick Heath-Lay said: “While there are many factors that can make a pension attractive, the two fundamental aspects are investment returns and charges.

“Unfortunately, very few people know exactly what they are being charged for their pensions and they are being let down by an industry that doesn’t make this information easy to find or understand. If people can’t make an informed decision about the value they are being offered by different providers, they risk losing thousands of pounds from their retirement pots. This lack of transparency is an enormous issue that pensions providers have to address.

“Our research shows the real-world impact of small differences in percentages are incredibly hard to grasp, so the onus is on the pension industry to make sure consumers understand what they are being charged. We are taking direct action to provide our members with more guidance through the transfer process and are creating tools that will support them to make informed decisions that are in their best interests.

“We passionately believe that there must be an obligation on pension providers to give clearer information to those savers who are considering transferring and the industry must move to provide comparable consumer focused value metrics.”