Pensions: Workplace Schemes Investigated
Defined contribution workplace pension schemes are being investigated by the Office of Fair Trading (OFT) as automatic enrolment gathers pace.
The OFT said its market study would examine whether they are set up to deliver the best value for money for savers.
Four million people in the UK currently use such a scheme to save for retirement and the Government's auto-enrolment is expected to result in as many as nine million others having to join up.
It is hoped that defined contribution schemes, which invest money contributed by an employer and individual to buy a pension income, will help eradicate the crisis in retirement incomes.
The value of annual contributions into pension schemes is expected to soar by around £11bn by 2018.
But fears have been raised that many people will have little previous experience of pensions and there is a danger that smaller employers in particular could bring millions of new investors into older schemes offering poor value.
Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), said that people are often "very suspicious" about pensions, but this needs to change in order to get more saving for their old age, especially given growing life expectancies.
She said: "Millions of people will get a new workplace pension under the much-needed auto-enrolment reforms and they need to have more confidence in the product."
The watchdog's market study will look at whether competition between providers is tough enough to work in savers' best interests, what size of pension pot people are likely to end up with, whether there is enough pressure on providers to keep their costs down and how clear their charges are.
The watchdog also wants to discover whether smaller firms are being given enough help in establishing pension schemes.