One simple way to help your pension grow

When people think about growing their pension, they often focus on contributing more. And if you can afford to increase your contributions, it's a great way to boost your retirement savings.

But it's not the only factor that matters.

The fees you pay on your pension can have a surprisingly big impact on how much you end up with in retirement. 

A difference of half a percentage point might not sound like much and may not even be noticeable over a few months or years. But over the decades many people spend saving for retirement, it can add up to thousands of pounds.

Small differences can add up

To illustrate the impact, we looked at someone who pays £250 a month (including tax relief) into their pension from age 25 until age 66. 

If they paid 0.5% a year in fees, their pension pot would grow to around £392,000 by age 66, assuming an annual investment return of 5.5%.

But if they paid 1.0% in fees, they would end up with around £345,000. That's a difference of approximately £47,000. 

To put that into context, the money saved simply by paying lower fees could cover around one-and-a-half years of retirement living costs at a moderate standard of living, according to Pensions UK's latest Retirement Living Standards.

How fees can affect the size of your retirement pot

Notes: This hypothetical scenario is for illustrative purposes only and doesn’t represent a particular investment or its expected returns. Assumes an annual return of 5.5% and monthly contributions of £250 (including tax relief) from age 25 to age 66.

Source: Vanguard. 

Check what you're paying

Many people aren't sure what they’re paying in pension fees.

A good place to start is by reviewing your pension statement or online account. 

Once you know what you're paying, you can compare charges and better understand what you're getting for your money.

Could you pay less?

Pension fees vary between providers, so if you've had the same pension for a long time, or haven't reviewed it recently, you may find there are lower-cost options available. 

When you’re comparing providers, it’s also important to look at the investments available, the support offered and whether the pension meets your needs.

If you've found a pension that's a better fit, you may be able to transfer your existing pension savings across. Before doing so, make sure you understand any valuable benefits, guarantees or features that could be lost by moving.

If you have a defined benefit¹ – or ‘final salary’ – pension, which pays a guaranteed income, transferring is unlikely to be suitable. Check with a financial adviser if you’re not sure.

A low-cost option for your retirement savings

At Vanguard, we offer a flexible low-cost self-invested personal pension (SIPP), which has been endorsed by Which? for seven years running.

Keeping costs low is one of our four investment principles because even small differences in fees can add up over time. You can learn more about our fees here.

We offer several options to help you get started:

• Build your own portfolio: if you’re comfortable being hands on, you can choose from our wide range of low-cost funds to build a portfolio yourself.

• Ready-made portfolio: if you prefer to keep things simple, our Target Retirement funds combine different investments into a single, ready-made portfolio, which gradually becomes more cautious as you get closer to retirement.

• Managed Personal Pension: if you’d like more of a helping hand, our Managed Personal Pension does the work for you. We select a portfolio of investments on your behalf, based on your attitude to risk, and manage it for you every step of the way.

Moving your pension to Vanguard

If you're considering switching to Vanguard, we'll take care of the transfer process for you.

You can combine multiple pensions with us, giving you a clearer view of your retirement savings.

Find out how to transfer a pension to Vanguard and what to consider before getting started.

¹ Defined benefit (DB) pensions pay a guaranteed income depending on your final or average salary and are funded by employers.

Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Any projections should be regarded as hypothetical in nature and do not reflect or guarantee future results.

Eligibility to invest in a Vanguard Personal Pension depends on your individual circumstances. Please be aware that pension and tax rules may change in the future and the value of investments can go down as well as up, so you might get back less than you invested. You cannot usually access your pension savings or make any withdrawals until the age of 55, rising to the age of 57 in 2028.

If you are not sure of the suitability or appropriateness of any investment, product or service you should consult an authorised financial adviser. Please note this may incur a charge.

Your transfer will be sent to us as cash or shares (Vanguard funds only). During the transfer period any cash will not be invested so you could miss out on any increase in the value of your investments should the market rise.

Any tax reliefs referred to are those available under current legislation, which may change, and their availability and value will depend on your individual circumstances. If you have questions relating to your specific tax situation, please contact your tax adviser.

The Vanguard Target Retirement Funds may invest in Exchange Traded Fund (ETF) shares. ETF shares can be bought or sold only through a broker. Investing in ETFs entails stockbroker commission and a bid-offer spread which should be considered fully before investing.

For further information on risks please see the “Risk Factors” section of the prospectus on our website.

Important information

This is a marketing communication.

Vanguard only gives information on products and services and does not give investment advice based on individual circumstances. If you have any questions related to your investment decision or the suitability or appropriateness for you of the product(s) described, please contact your financial adviser.

For further information on the fund's investment policies and risks, please refer to the prospectus of the UCITS/NURS and to the KIID/KII before making any final investment decisions. The KIID/KII for this fund is available, alongside the prospectus via Vanguard’s website.

This is designed for use by, and is directed only at, persons resident in the UK.

The information contained herein is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information is general in nature and does not constitute legal, tax, or investment advice. You must not, therefore, rely on it when making any investment decisions.

The Authorised Corporate Director for Vanguard LifeStrategy Funds ICVC is Vanguard Investments UK, Limited. Vanguard Asset Management, Limited is a distributor of Vanguard LifeStrategy Funds ICVC.

For investors in UK domiciled funds, see our summary of investor rights and is available in English.

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