Don’t get caught in the pensions trap

Paying for pension transfer advice by commission could knock up to 30 per cent off your retirement pot, finds new research from Which?

Experts from the consumer champion carried out an inquiry into the sector to uncover just how much money consumers are losing due to advisers encouraging savers to switch their pension when there's no need.

Working with a top independent financial adviser, Which? discovered that a male customer aged 45, who has his £50,000 pension switched to Prudential, could see the value of his pension pot at retirement reduced by almost a third because of the high levels of commission paid to his adviser.

Standard Life customers didn't fare much better in the investigation, with more than 20 per cent wiped off the pension pot of the man in Which?'s scenario. Customers who have their pensions switched to Cofunds or Skandia also face losing out substantially due to the higher charges on these platforms.

Which? chief executive Peter Vicary-Smith says: "The results of our investigation were shocking, with some advisers charging so much in commission that people could see thousands of pounds wiped from their pension pot. 

"It's crucial that you do take independent, specialist advice before switching, but paying a one-off fee rather than commission could save you a lot of money in the long term."