The majority of pension providers and managers are failing to inform savers about 'hidden charges' which typically wipe £100,000 off pension savings, a think tank has said.
A year long study, Seeing through the British Pension System, from the RSA has found workers in the UK are routinely denied simple and low-cost pensions available to people across Europe.
The Telegraph reports pensions minister Steve Webb said government is willing to step in unless fees are lowered and become more transparent.
Labour leader Ed Miliband weighed into the pension fee debate last week, when he suggested a cap should be introduced.
The RSA report found that 21 of the 23 pension providers surveyed failed to inform people about the charges, other than the annual management charge.
It said audit and custodial costs, and other hidden costs including taxes, stock lending fees and broking commissions were not communicated to members.
Author and fund manager David Pitt Watson said the scale of hidden levies was "extraordinary" and charges accounted for up to 40% of typical retirement savings.
“For markets to work effectively, consumers need to know what they are buying,” he said. “It is extraordinary that, after so many years, such a system is not in place in this country. It is vital that people have access to straightforward, accurate, high-quality information.”
The report comes ahead of the government's introduction of auto-enrolment where millions of qualifying workers will be enrolled into work place schemes for the first time.
The report found that in Denmark, a full clear statement is provided to pension holders. It concludes that the same could, and indeed must be made available in Britain if the pension market is to work effectively.
The report also warned that small businesses have little idea about which providers represent good value for money and that there is a huge danger that they will be sold expensive and inappropriate products when auto-enrolment laws come into force.
The RSA noted that the Department for Work and Pensions (DWP) has inadvertently allowed the removal of consumer protections that presently cover workplace pensions – without which there is a real danger of these otherwise admirable reforms resulting in a mis-selling scandal.
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