People using the pension freedoms have seen as much as 10% of their retirement pot swallowed up by providers’ charges, research from Citizens Advice has found.
The charity also found seven in 10 (70%) people accessing their retirement pot under the freedoms are not shopping around for different products, meaning they potentially risk ending up with a poor value deal that does not meet their needs.
Fears that switching provider may incur larger fees than staying put appear to be putting many people off shopping around, the findings suggest. One in six (15%) people stuck with their provider because they did not want to be hit by exit charges.
Citizens Advice found that people have been faced with “high” and “confusing” exit fees and other charges to get at their savings.
It estimates from its findings that 160,000 people have paid to access their pensions since the freedoms were launched in April 2015.
Two-fifths (41%) of people using the pension freedoms told Citizens Advice they paid at least one type of charge.
Those facing fees reported an average cost of £1,577 in total - and “most worryingly”, those with smaller pots faced higher average charges - Citizens Advice found. People who have pensions of £20,000 or less who have faced fees were paying an average of £1,966.
Citizens Advice said: “For some consumers this can mean they have lost 10% of their retirement savings to charges levied by providers.”
Some people are also facing long waits to access their money, Citizens Advice found. And more than half of consumers received their first payment within a month of making a request, around one in six (16%) had to wait over two months.
The charity made its findings from a survey more than 500 people who had accessed their pension since the launch of the freedoms, which give over-55s more flexibility over how they access their cash rather than being required to buy a guaranteed income called an annuity.
Some consumers are finding that their providers are not offering the full range of freedoms, Citizens Advice said, with more than two-fifths (44%) of those who switched provider saying they did so to access the product they wanted.