Research released today (10 June) by the Citizens Advice Bureau has revealed that people are not shopping around under the new pension freedoms which were introduced in April 2015.
A total of seven in 10 people who have accessed their pension since new freedoms came into force did not shop around for different products, based on a survey of 501 people aged 55 and above by the charity who accessed their defined contribution pensions after April 2015.
Citizens Advice Bureau has found a quarter of consumers - 24 per cent - who stayed with their pension provider did so because they thought the product they were offered delivered the best value, despite not looking at options with other providers.
The report reveals the reasons why people are choosing to stay with their existing provider, with over a third - 36 per cent - stating they trusted their existing pension provider.
A total of one in three - 30 per cent - had a product which met their needs, whilst three in ten - 29 per cent - said they stayed because it was the easiest way to access their savings.
Additionally, more than one in seven people - 15 per cent - said they wanted to avoid exit charges.
Up to 160,000 people have paid fees when accessing their pension since the freedoms were introduced.
The group which has been hit hardest by fees are those with smaller pots. Those with pensions of £20,000 or less have paid an average of £1,966, with some consumers losing 10 per cent of their retirement savings to provider charges.
Citizens Advice Bureau added alongside its findings that the recent proposal for the cap on exit fees at 1 per cent by the Financial Conduct Authority is too high, and as such it is calling for a standard £50 charge to cover provider’s administration costs.
The research also found that consumers who buy annuities are more likely to shop around with over half - 57 per cent - checking products with other providers.
This compares to two in five - 39 per cent - who bought a drawdown product and just 14 per cent for those taking cash.
As a result of the research, Citizens Advice Bureau has warned that if consumers do not look at a range of different pension products they may end up with a poor value product which does not meet their needs.
Gillian Guy, chief executive of Citizens Advice said picking a pension product is one of the biggest financial decisions people will ever make, so it is worrying that so many are not shopping around.
“More and more consumers are choosing drawdown products but our research shows they aren’t checking whether they’re getting the best deal. The Government and industry needs to work together to make it easier for consumers to compare drawdown products and choose the one which best meets their needs.
“The threat of excessive charges can also put people off making the right pension choices for them. A standard £50 exit fee across all types of pensions will mean consumers can make the most of the pension freedoms.”