Millions of pensioners could be far worse off in their retirement than they should be due to "unscrupulous" pension providers, according to a new study.
A report from the think-tank Civitas published on Monday warns retirement incomes could be be stripped of between 20 per cent and 75 per cent of their value due to anti-consumer practices.
The report, You're on Your Own, argues that despite conscientiously saving during their working years, millions of Britons are being ripped off by pension providers not being upfront about costs.
It claims providers exploit a "common blind-spot" among consumers who often miss exponential increases in costs. This means that pension fund managers can charge what looks like a small fee by defining it as the percentage of a growing pension pot.
The authors give the example of a typical 1.5 per cent management charge that costs just £15 in the year a pension scheme is opened, but £3,000 in its 40th year.
According to Civitas, previous governments, especially Margaret Thatcher's, did not legislate to stop pension providers from charging excessive fees. This, the report argues, was the product of government reliance on free market principles that would "help pension savers get a good deal".
"This has involved encouraging individuals, rather than companies, to take responsibility for their own retirement savings," it said.
The authors warned that the complexity of pensions means savers find it hard to spot poor deals.
"In practice, savers find it hard to compare deals between pension providers or understand the cost implications of different charges. It is this complexity that allows poor deals to flourish in the pension sector."
"This failure to protect consumers was due to a dogmatic reliance of successive governments on free market principles to help pension savers get a good deal," they said.