Nearly three million UK workers are losing money by making additional pension contributions to workplace schemes where they receive no extra employer contributions, new research from InvestEngine has found.
Despite receiving no additional employer contributions, these workers continue to pay high fees that erode the value of their retirement savings.
As it stands, the minimum contribution is eight per cent of qualifying earnings with three per cent coming from employers and five per cent from employees.
InvestEngine's research reveals that 30 per cent of workers with defined benefit (DC) pensions, which is about 4.2 million people, say their employer does not offer to increase contributions when employees contribute more.
Britons are "losing out" as millions of workers are paying fees on workplace pension pots GETTY Despite this, 30 per cent of these workers still choose to make additional contributions.
This means approximately 2.8 million workers are making extra pension payments without receiving any additional employer contributions.
These workers are also typically paying high fees on these additional contributions, reducing their retirement potential.
According to government data, the average workplace pension scheme fee is 0.48 per cent per year.
Some schemes charge up to the capped maximum fee of 0.75 per cent. These seemingly small percentages can have a dramatic impact over time.
Using InvestEngine's fee calculator, someone saving £400 monthly into a workplace pension with a 0.75 per cent annual fee would pay over £142,000 in fees over forty years.
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This substantial sum could have contributed to a larger retirement pot with a lower-fee alternative. Even those with personal pensions such as SIPPs aren't immune to fee erosion.
The average SIPP account fees could leave savers £35,000 worse off over 40 years. This figure would likely be even higher when monthly and trading fees are included.
George Bonello, Head of Pensions at InvestEngine, expressed concern about the situation.
He said: "As a country, we know that too few people are adequately saving into a pension for their retirement.
"But it's also concerning that those who are able to make additional contributions to their pension each month may in fact be losing out by not shopping around for a lower cost provider.
"For those who can afford to do so, making additional contributions to your pension is a smart idea, but as it stands, more than a million people are making these payments in their DC workplace schemes where they're not getting anything more from their employer, but are still paying fees on their funds.
"Given there are completely fee-free options available, this means that workers could be significantly worse off at retirement.
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Workers could cost businesses even more in the years to come GETTY "By shopping around to find a pension provider with lower fees, coupled with claiming all eligible tax relief, people could end up tens or hundreds of thousands of pounds better off at retirement, helping them achieve a better standard of living for later life."
InvestEngine's January research found that more than half of the 7.44 million people paying higher or additional tax rates contribute to personal pensions.
However, 2.3 million of these taxpayers fail to claim their eligible tax relief. This oversight can have enormous financial consequences, InvestEngine claims.
For someone saving £400 monthly into a personal pension over 40 years, failing to claim tax relief could reduce their retirement pot by £350,000.
