UK Workplace Pension Problems: The Shocking Truth Every Employee Must Know (And What You Can Do)

If you've worked for several employers over the years, you probably have multiple workplace pension pots sitting with various providers. While this might seem harmless, these pensions often come with high charges, limited fund options, and restricted access to professional advice.

In this article, we'll explore the most common problems with UK workplace pensions, how they could be holding you back, and what steps you can take to regain control and improve your long-term financial outcomes.

🏦 What Is a Workplace Pension?

A workplace pension is a pension scheme set up by an employer. Contributions are usually made by:

• You (via salary sacrifice or direct deduction)

• Your employer (minimum 3% of qualifying earnings)

• HMRC (via tax relief)

Auto-enrolment has helped millions of people start saving for retirement. But the default setup of many workplace schemes can leave much to be desired.

⚠️ Common Problems with Workplace Pensions in the UK

1. High Charges

Some workplace pensions charge over 1% per year in management fees. While this may not sound like much, it adds up significantly over time.

For example:

• A 1% annual fee on a £100,000 pension = £1,000 lost each year

• Over 20 years, assuming 5% growth, that could cost you over £50,000 in lost returns

Low-cost platforms now offer comparable portfolios at 0.25% to 0.40% total annual cost.

2. Limited Fund Choice

Many workplace schemes offer only a handful of funds - often default "lifestyling" options that shift your investments into lower-growth assets like bonds as you near retirement.

These default funds may not suit your retirement plans. For instance, if you're planning to draw flexibly rather than buying an annuity, staying invested in growth assets for longer may be far more appropriate.

3. No Access to Professional Advice

Most workplace pension providers do not allow financial planners to advise or manage the account directly. This means:

• You must make key decisions alone

• There's no personalised investment strategy

• No holistic financial planning or tax optimisation

You are left with a "one-size-fits-all" solution in a world where your financial future deserves better.

4. Multiple Pots, No Coherence

Changing jobs often results in:

• Multiple pension pots scattered across providers

• Duplicated charges

• Overlapping or mismatched investment strategies

• Inability to track or manage your overall retirement plan

Without proper consolidation, it becomes almost impossible to know where you stand.

💼 What You Can Do About It

1. Review Your Existing Pensions

Start by gathering statements and logging into your online portals. Find out:

• Your current fund allocations

• Annual charges and admin fees

• The platform's flexibility and investment choice

If you are unsure, ask for a scheme factsheet from the provider.

2. Consider Consolidating into a SIPP

A Self-Invested Personal Pension (SIPP) allows far greater control and often much lower costs.

Benefits include:

• Wider investment choice, including index funds, model portfolios, and ethical options

• Professional advice - a regulated financial planner can help optimise your setup

• Consolidation of multiple pots into one, making it easier to track, manage, and plan

Many modern SIPPs also come with transparent fee structures and better online functionality.

Note: Transferring out of a defined benefit (final salary) pension requires regulated advice and may not be suitable. You should consult with a regulated Pension Transfer Specialist for this. We are able to recommend you one should you need one.

3. Understand the Transfer Process

The steps usually involve:

• Opening a SIPP account with a trusted provider

• Requesting a transfer form or authorisation letter

• Awaiting confirmation from your old scheme (can take 2–6 weeks)

• Reallocating the transferred funds into your preferred investments

Watch out for:

• Exit fees from your current provider

• Loss of employer contributions if still active

• Temporary market movements during the transfer

4. Get a Personalised Strategy

A regulated financial planner can:

• Model your future cashflow

• Align your pension with your retirement age and goals

• Suggest a tax-efficient drawdown strategy

• Minimise costs and rebalance your portfolio regularly

This can make a substantial difference to both peace of mind and long-term outcomes.

🤝 Ready to Take Back Control?

If your pension is still sitting in a default fund, charging high fees, and limiting your options, you may be missing out on thousands of pounds in future value.

In a free 15-minute call, we can:

• Review your existing pensions

• Show you how to consolidate efficiently

• Help you take practical next steps toward retirement confidence

Book your free review today and unlock your pension's full potential.