Just three in ten people who have used the pension freedoms shopped around the market for the best price, Citizens Advice research reveals.
The charity’s survey of 500 people found while 57 per cent of annuities were bought after checking other providers, only 39 per cent of drawdown products were bought following a shopping around exercise.
The figures take into account savers who fully cashed out their pension. Citizens Advice says these are included because some of these people wanted to go into drawdown but were prevented by their provider.
Stripping out this figure, the overall shopping around figure rises to 34.6 per cent.
When asked why they stuck with their existing firm, over a third said they trusted their provider, while 15 per cent wanted to avoid early exit charges.
In addition, the report shows around 160,000 people have paid fees when accessing their pension since the reforms took effect in April 2015.
Citizens Advice, which last month called for a £50 cap on exit penalties rather than the FCA’s 1 per cent limit, is calling on the Government to produce a tool to compare drawdown products.
Chief executive Gillian Guy says: “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.
“More and more consumers are choosing drawdown products but our research shows they aren’t checking whether they’re getting the best deal. 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.”
Association of British Insurers director of policy for long term savings and protection Yvonne Braun says: “Our latest industry figures, which measure what customers actually do, show that 58 per cent of savers switched provider when buying a drawdown product and 38 per cent switched when getting an annuity.
“A higher number of customers are likely to have shopped around but then found they were already with the best provider for them, so won’t have switched. We also estimate around half of customers who stayed have guaranteed annuity rates.”