Financial firms are grabbing up to 10% of money accessed under pension freedoms, according to a new study.
Around 160,000 over 55s have paid a pension provider a fee to take money from their retirement savings, claims the report from consumer watchdog Citizens Advice.
Close to 66,000 have paid an average £1,577 to access their cash, while savers with smaller pots of £20,000 or under paid an average £1,966.
The research also found that 70% of retirement savers were not shopping around for the best pension deals, leading to many finding poor value products that did not suit their needs, said Citizens Advice.
The fear of fears taking a large chunk out of their savings was also driving one in six to stay with their pension provider after accessing their cash because the feared exit fears would be too high if they shopped elsewhere.
Call for lower fees
Citizens Advice was also told many providers were not offering the products they wanted, so 44% of retirement savers had to switch to another firm and pay the exit fees regardless of how much they cost.
Pensions regulator the Financial Conduct Authority has announced plans to cap exit fees at 1% of the value of the fund, but Citizens Advice wants the amount reduced to a £50 administration fee.
Citizens Advice chief executive Gillian Guy said: “Making the right financial choices about pensions is a huge decision for most people and they are not checking if they are getting the best deal because they are worried about charges.
“The government and pension industry need to work together to sort this out so consumers can more easily compare products and make informed choices.
“Concerns about excessive charges are making these choices harder.”
We’re doing our best, say firms
The Association of British Insurers (ABI), the trade body for pension providers, countered that industry figures showed 58% of consumers switch providers on drawdown and 38% switched when shopping for an annuity.
“We believe half the customers stayed with their providers because they had guaranteed annuity rates and would not have found a better offer and that many found their own provider already offered them the best deal.
“Pension providers want customers to have the right information and are committed to promoting the free advice service offered through Pension Wise by the government.”
