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Legal & General (L&G) research, conducted amongst 95 adults in possession of a personal pension plan and retiring in the next two to three years, showed that pensions are quite well understood alongside other financial matters such as mortgages, loans, savings and investments.

When asked specifically about their pension arrangements, 70 per cent of respondents said they understood the options available to them at retirement. However, of those, two-thirds also said they did not intend to shop around.

The remaining third said they planned to shop around, with many intending to use a financial adviser.

Tim Gosden, head of annuity product development for L&G’s individual annuities business, said: "There is no doubt that the poor uptake of the open market option is an issue.

"But our research highlights that it would be wrong to assume that consumers are not aware that they are able to shop around or are not aware of the retirement options available to them."

The Open Market Option (OMO) allows the member to transfer their pension fund from one life assurance company to another to achieve a higher annuity rate before any benefits are drawn from the existing life assurance company.

Gosden added: "We believe it is important that today’s annuity customers do make a conscious informed choice on their future income in retirement, so we actively encourage customers to use an adviser and the open market option to shop around."