Critics of the pensions freedoms worried it would lead to pensioners going on shopping sprees for Lamborghinis. However, research out today suggests they should have been more concerned about them not shopping around for the best pensions deal.
The study by Citizens Advice discovered that seven out of ten people who have dipped into their pensions pot since the freedoms rules came into force last April did not stop to compare different products before doing so.
Of those surveyed who had accessed their pension and chosen to stay with their pension provider, 36 per cent said they did so because they trusted their current provider, 29 per cent said it was the easiest way to access their savings and 15 per cent said they didn't want to be slapped with exit charges for switching.
Those who chose to access their pension by purchasing an annuity were the most likely to shop around, with over half (57 per cent) saying they had done so, compared with only two in five (39 per cent) of those opting for drawdown products and a mere 14 per cent choosing to take cash.
"Picking a pension product is one of the biggest financial decisions people will ever make, so it’s worrying that so many aren’t shopping around," said Gillian Guy, chief executive of Citizens Advice.
Citizens Advice also criticised the Financial Conduct Authority's (FCA) proposed one per cent cap on exit charges for being too high, and suggested that a standard £50 charge to cover administrative costs should be imposed instead.
The charity pointed out that up to 160,000 people have had to fork out fees for accessing their pension since the freedoms came into force, while those with the smallest pots were often hit the hardest.
Guy said: "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."
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The FCA put forward proposals to limit exit charges on existing contract-based personal pension schemes in May, and has also proposed banning such fees on plans set up in the future.
An FCA spokesperson said: "We are currently consulting on this cap and would welcome all feedback to our consultation which closes 18 August."
Under the recently introduced pension freedom rules, those aged over 55 can now access their pension without first purchasing an annuity.