Pension fees: how to check yours for a retirement boost worth thousands

Retired couple with paperwork for home finance, checking their pension fees

(Image credit: shapecharge via Getty Images)

published 10 September 2025

Tucking your hard-earned money away into your pension is supposed to be the pathway to securing a comfortable retirement. But new analysis from Vanguard shows that higher pension fees could be eating into your pension pot.

Over the course of your working life, higher fees can knock tens of thousands of pounds off the final value of your pension.

Vanguard’s analysis shows that someone earning the UK average salary of £37,500 and contributing £250 per month into their pension from age 25 to 66 could accumulate £465,000 by the time they reach retirement age, assuming a 6% annual return and a 0.5% fee.

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But if the annual fee was 1%, their pension pot’s value would shrink to £406,000 – £59,000 less than with a 0.5% fee.

“Putting it simply, fees erode your returns,” said James Norton, head of retirement and investments at Vanguard Europe. “High fees are a hurdle that an investment manager needs to overcome just for you to breakeven.”

“Our analysis shows that if you keep your pension pot with a low-cost provider, in the long term you could keep significantly more of your returns and significantly improve your retirement,” said Norton. “It is your money and you’re taking the investment risk, so make sure you keep as much of your returns as possible.”

How do pension fees impact your retirement?

The impact of higher fees on the final value of your pension pot can be substantial.

According to Pensions UK (formerly the Pensions and Lifetime Savings Association, PSLA) the cost of a comfortable retirement has risen from £43,100 to £43,900 a year for a single person household and from £59,000 to £60,600 a year for a two-person household.

That means someone living by themselves would need a pension pot of at least £540,000 to be able to afford to retire comfortably (assuming they used the pot to buy an annuity, for guaranteed income).

But high pension fees could put this out of reach for many people by knocking tens of thousands of pounds off the value of their pension.

Vanguard’s analysis found that annual fees of 1.5% would reduce the amount that the median worker would save through their working life to £355,000; £110,000 less than the same contributions would accumulate with 0.5% annual fees.

Swipe to scroll horizontally

Total retirement pot at 66*
Header Cell - Column 0	With a 0.5% annual charge	With a 0.75% annual charge	With a 1% annual charge	With a 1.25% annual charge	With a 1.5% annual charge
Row 0 - Cell 0	£465,000	£434,000	£406,000	£379,000	£355,000
Difference compared to 0.5% charge	-	-£31,000	-£59,000	-£86,000	-£110,000

*Assuming a monthly contribution of £250 into a pension from 25 to 66 and average annual return of 6%

Source: Vanguard

Four ways to maximise your pension pot

Here's how to ensure you aren’t paying over the odds for your pension.

Check your current pension

According to Boring Money’s 2024 Pensions Report, 57% of people don’t have a clear understanding of the fees they are paying on their pension. Reviewing your pension statements to check the fees you are paying is a good place to start, allowing you to compare fees to other potential providers.

Make sure it’s the right pension for you

Check that the investments held within your pension reflect your financial goals, your life stage and risk tolerance.

It is also worth checking that the investments in your pension are performing well, whatever the level of fees being charged.

“When buying a car, it’s common for a more expensive vehicle to perform better than a cheaper one,” says Norton. “So, you may think that higher fees should lead to better investment outcomes.”

This isn’t necessarily the case, though, and the higher the fees you pay the less returns you get to keep for yourself.

Combine your old pension pots

Boring Money’s 2024 Pensions Report also shows that 40% of non-retired UK adults have two or more pension pots. Tracking down all your pension pots, checking their charges and combining them into a new plan could cut down on admin, provide a clearer view of your savings and mean you save on fees if you consolidate to a low-cost provider.

You could also consider making additional contributions to your pension in order to boost your pension savings.

Research from Standard Life found that 31% of UK adults have voluntarily increased their monthly pension contributions beyond the minimum and that 10% have made one-off lump sum payments into their pension pot.

Standard Life found that boosting monthly contributions by 2% could add £52,000 to your retirement pot, while a one-off £1,000 payment every five years could add £21,000.

“You don’t need to make huge changes to see a big impact,” said Dean Butler, managing director for retail direct at Standard Life. “Even small top-ups, whether monthly or occasional, can add up to tens of thousands of pounds over a working lifetime.”

Dan is a financial journalist who, prior to joining MoneyWeek, spent five years writing for OPTO, an investment magazine focused on growth and technology stocks, ETFs and thematic investing.

Before becoming a writer, Dan spent six years working in talent acquisition in the tech sector, including for credit scoring start-up ClearScore where he first developed an interest in personal finance.

Dan studied Social Anthropology and Management at Sidney Sussex College and the Judge Business School, Cambridge University. Outside finance, he also enjoys travel writing, and has edited two published travel books.