Individuals withdrawing money from their pension savings may lose up to 10% of their funds, a Citizens Advice survey has suggested.
The survey revealed that those using pension freedoms may have had their savings significantly reduced as a result of providers’ charges.
The data suggested that individuals with smaller funds have been paying proportionately larger fees: those with pension pots of £20,000 or less have paid an average of £1,966 in charges.
Recently, the Financial Conduct Authority (FCA) proposed a 1% cap on exit fees for current pension schemes. The FCA had previously warned that an estimated 670,000 consumers already face high fees.
However, Citizens Advice has stated that this cap is too high and is instead proposing the introduction of a standard £50 charge to cover providers’ administration costs.
Gillian Guy, chief executive of Citizens Advice, said: ‘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.’