Stronger safety nets are needed to protect people taking up the Government’s new retirement freedoms which come into force one month from today, Which? has warned.
The consumer group’s research found that people could potentially be thousands of pounds worse off if they are sold an inappropriate retirement product.
It has launched a “better pensions” campaign to help people access good value, low cost pension products.
From April 6, over 55s will be able to take their defined contribution (DC) pension how they want, when they want to, which could be all in one go or in a series of slices. They will no longer feel forced to buy a retirement income called an annuity with their pension savings.
Which? said the changes will make it likely that more people will use income drawdown products allowing them to take money out gradually each year. But its research uncovered a lack of product innovation in this market, with variations in charges it said could be as high as 2.76 per cent.
A person with an average sized pension of £36,000 and drawing £2,000 a year would be about £10,300 better off over their retirement if the cost was capped at 0.5 per cent than they would be if they were charged 2.75 per cent.