Thousands of drawdown investors are paying millions of pounds in excessive charges on their pension income, reveals Hargreaves Lansdown.

Figures show that the size of the average drawdown fund in 2008 was £80,000. By reducing the charges by just one per cent per annum, this fund could be worth £26,500 more in just 15 years.

According to Hargreaves Lansdown, when these plans were first designed back in the mid-1990s, it was quite common for investors to be charged set up and annual fees of hundreds of pounds for their drawdown.

In many cases this was simply because the pension companies (mainly insurance companies) were so inefficient that they had to charge for their administration. This was before the internet and before technology delivered the means to administer pensions efficiently and at a low cost.
 
Nigel Callaghan, pensions analyst at Hargreaves Lansdown, says, ‘It is important to remember that drawdown plans are not some unique and exotic pension scheme that sits outside other pensions. Drawdown is simply an income withdrawal option that exists within an ordinary pension. Very often drawdown is set up within a SIPP in order to give investors the widest possible range of investment choices. Where a SIPP isn’t used, then typically drawdown will be an option in a Personal Pension.
 
‘Investors need to check that their drawdown plans still represent value for money. Technological advances and fierce competition have resulted in drawdown evolving from an expensive niche product for the very wealthy few, to a viable everyday option for the many investors who are happy with the risks involved.’

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