Those reaching retirement should “look under the bonnet” at the charges and investment mixes of the retirement products they are being offered, according to LCP.

Focusing on the most popular investment pathway for customers going into drawdown at eight separate providers, the firm found that the average charge quoted for a £100k pot was 0.64 per cent in year one, with this cost ranging from 0.39 per cent to 0.93 per cent.

LCP also noted that investment mix could vary greatly from provider to provider, even within the same investment pathway, with the share invested in equities ranging from 27 per cent to 60 per cent.

To this end, the firm warned that such a low allocation to equities was likely to produce poor outcomes over a long retirement and that even the most heavily equity-based product on offer to these savers might struggle to sustain the kind of regular income that retirees will be looking for.

To illustrate this, it was explained that, among the funds for which a three-year performance was available, their performance ranged from 2.2 per cent to 4.6 per cent per annum, while comparative tracker funds would have returned between 4 per cent and 5 per cent a year during the same period.

LCP Partner, Dan Mikulskis, said: “Freedom to choose what to do with your pension pot is a good thing, but too many people are at risk of getting poor outcomes. The new investment pathways are welcome where they have helped to put downward pressure on charges and could help steer consumers towards the right product.

“But our research has shown that different providers vary hugely both in what they will charge and in the product they will offer to the same individual.

"Savers need to look under the bonnet to see how their money will be invested before they choose where to save, and they need to avoid the risk of investing too cautiously given that retirement can easily last for several decades.”

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