What is your pension actually costing you?

Think about the bills you've paid this year. The energy company sends a statement. The phone company takes a direct debit. Even your bank, if it charges you, shows the fee on your statement.

Your pension has never sent you a bill. No invoice, no direct debit, no receipt. And that's exactly why so many people assume there's nothing to pay.

It's a common conclusion. In a 2021 study by Ignition House for the pensions consultancy Hymans Robertson, four in ten pension savers agreed with the statement that a pension with no visible charges must be free.

It isn't. Nearly every pension carries charges, and they're taken in a way that's easy to miss. This article explains what those charges pay for, where to find your own figures, and what a typical pension actually costs.

Why fees are so easy to miss

So how do you pay for something without ever seeing a bill?

The answer is that pension charges come out of the pot itself. Each year, a slice is deducted from your fund before you see the result. If your investments grew by five per cent and your charges came to one per cent, your statement simply shows growth of four per cent. The charge is real, but it never appears as a payment.

There's a second reason fees stay under the radar. They're usually expressed as percentages, and small percentages sound like small money. One per cent doesn't feel like much. On a £100,000 pension, it's £1,000 a year. A pension may be the only expensive thing you ever buy without being told the price.

There's nothing improper in any of this. It's simply how pensions are built. But it does make the charges worth understanding, starting with what they actually pay for.

What your pension charges pay for

A pension isn't one service. It's several, bundled together, and each layer does a different job.

The investment charge. Your money is invested in funds, and each fund has managers who run it: choosing what to buy and sell, and handling the trading, administration and compliance behind it. This charge is often labelled the ongoing charges figure, or OCF, on your paperwork.

The platform charge. Somebody has to hold your pension: keep the records, process payments in and out, handle the tax relief, provide the website or app where you check your balance. That's the platform, and it charges for the administration.

The advice charge. If you use a financial adviser, you'll pay for the advice – usually a one-off fee when your plan is set up, then an ongoing fee that covers your annual review, conversations with the advice team through the year, and administration such as withdrawal requests.

The discretionary management charge. This is an extra layer some pensions have. A discretionary fund manager selects the mix of funds and keeps it aligned to your attitude to risk, adjusting as markets move rather than waiting for an annual review.

Not every pension has all four layers. A workplace scheme you've never touched might have two. A pension arranged through an adviser will usually have more, because more is being done.

The point is that each charge pays for real work. The question isn't whether to pay – it's knowing what you're paying, and what you're getting for it.

Where to find what you're paying

Start with your annual statement. Every pension provider sends one, and somewhere in it – sometimes prominently, sometimes not – your charges will be listed. Look for the ongoing charges figure, and for any platform or service fee shown separately.

If you're already drawing an income from your pension, you're entitled to more. Since 2020, the regulator has required drawdown providers to tell customers each year what they've paid in charges, in pounds and pence rather than percentages alone.

Your paperwork should also include an 'effect of charges' illustration: a table showing what your pension might be worth at retirement with and without charges applied. And this is the direction of travel. In July 2026, the Financial Conduct Authority published proposals requiring providers to show every customer the total costs they've actually paid, in pounds and pence, in their regular statements.

If the paperwork doesn't give you a clear answer, you have options. You can ring your provider and ask directly. Or you can use a free tool such as Pense's pension review, which checks the charges and features in your existing pension so you can see where you stand.

What does an advised pension typically cost?

Once you've found your figures, the obvious question is what they should look like.

For a pension in drawdown with ongoing advice, the industry average works out at around 1.75 per cent a year, according to the research firm NextWealth. That covers everything: the investment charge, discretionary management, the platform and the advice.

Percentages, again. So in pounds: on a £100,000 pension, 1.75 per cent is £1,750 a year. On £200,000, it's £3,500.

Notice what happened there. The pot doubled, and so did the charge – but the work involved didn't. Reviewing a £200,000 pension takes much the same effort as reviewing a £100,000 one. That's simply how percentage charging works, across most of the industry.

Some firms have moved to a different model. Pense, for example, charges 0.5 per cent a year for ongoing advice, capped at £750 – so once a pot passes about £150,000, the advice fee stops rising with it. With all charges included, the total comes to 0.88 per cent a year, roughly half the industry average.

Neither model is automatically right for everyone. But you can't weigh them up until you know which one you're in.

Why half a per cent matters

Fractions of a per cent look small on paper. Over a retirement, they add up – and that's not a scare story, it's the reason the 'effect of charges' illustration exists. The regulator requires providers to show how charges affect a pension over time precisely because a single year's figure understates their weight.

Here's what that looks like in practice. Take a £200,000 pension in drawdown, and set growth aside to keep the maths clean. Over ten years at typical industry charges, the total cost comes to £35,000. Over the same ten years with Pense, it comes to £18,095 – and that figure includes the one-off set-up fee of £2,995, while the industry figure covers ongoing charges alone. The difference is £16,905.

Timing matters too. In drawdown, you're taking money out while charges are coming out. Every pound paid in charges is a pound that's no longer invested – so in the years you're drawing an income, the rate you pay matters more, not less.

You're not being awkward by asking

If asking your pension provider what you're paying feels uncomfortable, it's worth knowing that the entire regulatory system is moving in the same direction as you.

The Financial Conduct Authority's Consumer Duty, in force since 2023, requires firms to show that their products offer fair value – that the price reflects what customers actually get. The FCA is currently reviewing how well pension providers live up to that, with particular attention to older products and layered charges. And the Pension Schemes Act, which became law in April, builds a value-for-money test into pension schemes themselves.

You don't need to follow any of it in detail. The point is simpler: what you pay for your pension, and what you get in return, is now one of the central questions in UK pensions. Asking it about your own pot isn't awkward. It's exactly what the system is being redesigned to help you do.

Three things worth knowing

None of this asks you to become a pensions expert. It comes down to three things worth knowing about your own pot: what you pay each year, in pounds and pence; what that money pays for; and how the charge is structured – a percentage of your pot, or a fee for the work.

And if part of what's stopped you asking is a feeling that advice isn't really for someone with a pot your size, that's an assumption worth a second look too.

What you do with the answers is up to you. What's right for one person may not be right for another, and a well-chosen pension on a percentage model can still be a good home for your savings. But the questions are yours to ask.

Robin Powell is a journalist, author and financial consumer advocate, and is editor of The Evidence-Based Investor