Most pension pots less than £50,000: report

The 72-page report, Treating Defined Contribution Scheme Members Fairly in Retirement, found the complexity of the annuity system can cause considerable financial detriment.

The study, published jointly by the Pensions Policy Institute at Cass Business School and the National Association of Pension Funds, also found that 80 per cent of UK employees have retirement pots of less than £50,000.

It warned that most annuity providers do not think it is profitable enough to give advice on pots of this size.

The report also recommended that employers and trustees should be able to support members at retirement without fear of regulatory reprisals.

It claimed the government should support the FSA and The Pension Regulator’s work on principles for DC by developing a single and simple set of rules for non-regulated advice in the workplace.

Joanne Segars, chief executive of NAPF, said: “While the accumulation side may not be perfect, the 5m to 8m individuals starting to save in a pension as auto-enrolment rolls out should at least feel assured that the policy for them has been thought through well.”

Ken Davy, chairman of IFA network SimplyBiz, said: “NAPF has calculated the loss as being about £1bn but we believe it could be as much as 30 per cent to 50 per cent more if health factors are taken into account.

“This issue has been recognised as an injustice for years and I cannot understand why it is still unresolved.”