Employers have been urged to provide more support to their workforce as the defined benefit transfer boom continues.
A report by pensions consultancy XPS analysed more than 6000 transfers totalling over £1.4bn since 2016, finding that charges can vary by up to 2 per cent per annum even among the 10 platform Sipps that dominate as a destination.
XPS finds the average transfer size is £230,000, and 95 per cent of these end up in a personal pension or Sipp, the remaineder falling mostly into occupational schemes including master trusts.
Depending on where the funds are placed, XPS says that pensioners could run out of money seven years earlier or buy an annuity worth £4,000 a year less if they make the wrong decision.
XPS principal Wayne Segers says: “Charging structures can be complex and confusing and employees may end up paying for flexibility in investments that they don’t need and will never use. With a continued surge in transfers from defined benefit schemes expected, it will be important for UK companies to help their employees and ensure they are supported in making good decisions with their pension savings.
“Given the amounts of pension savings being transferred and the range of outcomes people face, more needs to be done to ensure people don’t lose out in retirement. Recent high profile cases have highlighted the need for employers to take ownership to ensure members don’t make poor choices that may lead to reduced income in retirement and the risk of employers themselves being criticised in retrospect.”