Up to £232m taken yearly in hidden pension charges

The report said:

"Schemes where savers are potentially exposed to the very highest charges are more likely to have complex charge structures.

"The majority of the AUM exposed to charges over 3% (£0.7bn out of £0.9bn) is held by savers with pots of less than £10k. Of this, over 90% is held by savers that are paid-up and have stopped contributing.  For such savers the impact of monthly fees can result in a very high impact of charges."

The report estimated that up to £232million a year could be taken from people's pensions through these hidden charges, meaning the average worker could see almost a third of their life savings taken in up to 38 different charges.

Up to 200,000 are facing charges of 3% or more, and thousands of those hoping to take advantage of the pensions reforms and cash in their savings could face sky-high penalty fees of more than 10%.

Pensions minister Steve Webb said:

"The simple stand-out fact for me is that pension firms can apply 38 different charges, 38 different ways to take money out of your pension.

"Companies have been able to get away with these hidden charges because they are just that – hidden, and invisible to the consumer."

The People's Pension director of policy and market engagement Darren Philp called for a full standardisation of charges rather than a charge cap.

He said:

"Charges need to be plainly obvious for savers, employers and the Government. We need a system that works for savers and stops providers from gaming charging practice to the detriment of consumers."

Carol Sergeant, Chair of the Independent Project Board said:

"The challenge now is for providers and governance bodies to work together under the watchful eyes of the regulators and bring about the necessary changes, so that savers who are not in automatic enrolment schemes can benefit from modern standards and value for money outcomes."