More than a third of investors do not believe they are paying any administration fees for investment products such as workplace pensions, personal pensions, ISAs and investment funds.
The “collective blindness” has come to light in research carried out by Dundee-based investment firm Alliance Trust Savings, who found a serious lack of awareness of administration charges among investors – with 37 per cent believing they do not pay any administration fees for their investments.
This compares with an average of 32 per cent across the UK.
The nationwide survey of 1,000 individuals regularly investing into at least one investment product also revealed that among those in Scotland who said they pay an administration fee for their investments, 70 per cent did not know how much it was. Women were least likely to know, with 74 per cent admitting to not knowing how much they pay in fees, compared with 67 per cent of men.
In addition, there was confusion over the type of fee paid. Only 31 per cent of Scottish investors knew whether they pay a flat fee or a percentage fee for their pension or investment, similar to the UK average of 34 per cent.
With a flat fee, everyone pays the same. For people with larger accounts, flat fees can offer excellent value and make a big difference to what you could get back over the longer term. A £150,000 ISA investment pot could be more than £19,000 bigger after 20 years, just by paying a flat platform fee rather than a percentage fee.
Mark Polson, principal at the Lang Cat financial services consultancy, said: “It’s remarkable that, for a nation supposedly canny with its money, so many Scots are gripped by a sort of collective blindness when it comes to dealing with money itself.
“In fact we’re worse than the UK average. There is certainly work for the investment industry to do in terms of making sure people understand what they’re paying for the management of their investments.
“But at the same time, it’s crucial for Scots to remember that there’s no such thing as a free lunch. In fact, getting control of the charges on your investments could save more money than switching energy suppliers, car insurance and bank accounts combined.”
Sara Wilson, head of platform proposition at Alliance Trust Savings, said: “Fees can make a huge difference to the value of an investment pot over time. Whether you pay flat fees or percentage fees for your platform administration can also impact your investment returns.
“Many platforms charge a percentage fee, meaning higher-value accounts pay more, and effectively subsidise the costs of those with smaller account values, even though it does not cost ten times as much to service a £500,000 ISA as it does to service a £50,000 one.”