This tends to be how most workplace defined contribution pensions charge, but some pensions you set up yourself might use this as a way to charge too.
The annual management charge covers the cost of running and administering your pension scheme, as well as investing contributions in your pot.
You’ll be charged an amount each year, either as a set amount or as a percentage of the value of your pension pot investments.
Each investment tends to have a different annual management charge to reflect the type of investment fund. Some are more specialist or are more actively managed, and they often have higher charges.
The charges are usually taken directly. This means it’s already been taken into account when you look at the performance of your investments.
If you’re in a workplace or a stakeholder pension, there’s a charge cap on the default pension investment available if you don’t choose. This is set at 0.75% of the investment. In other words, for every £100 invested, you would be charged no more than 75p.