Members with average transfer values of £230,000 could lose up to seven years of retirement income under freedom and choice, XPS Pensions Group has found.

According to its report, Member Outcomes under Freedom and Choice, published today, 7 August, members could run out of money at 81 rather than 88 if they draw an income of £10,000 a year.

The outcomes, which depends on the retirement vehicle members choose to transfer to, could also see their income decrease by £2,600 over their expected lifetime or leave an inheritance £340,000 lower than expected.

XPS Pensions Group principal Wayne Segers, said: “Members deserve better guidance from the pensions industry. Advisers, employers, and trustees can do more to help them at this vulnerable time. It is hard to escape the fact that the last place where collective, cost-effective support can be provided to people is whilst they are still members of their employer occupational pension scheme."

According to XPS Pensions Group, on 6,000 transfers analysed since 2016, 95 per cent of transfers from a defined benefit scheme go to personal pensions, while the size of an average transfer of £230,000 could range from £7,000 to £10,000.

The report calls for education and support to be provided when transfer values are published; to consider offering partial transfers; making members aware of low-cost options and provision of “unbiased regulated financial advice”.

“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.

“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.

“Better support and education is needed so that those choosing to move their pension away from their employer’s scheme make an informed decision.”

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