UK - The UK government must act to create a well-structured annuity market or see pension savers "short-changed by a toxic system", according to the National Association of Pension Funds.
In a report done in conjunction with the Pensions Institute (PI) of London's Cass Business School, the industry umbrella organisation also predicted that the loss in annuity income could treble to £3bn (€3.6bn) over the next decade if changes were not introduced.
The report noted that employers and providers did not offer sufficient support to members.
"Often they get nothing more than a leaflet pointing them to a website with a postcode-based search engine," it said.
Instead, pension funds should have an in-built open-market option, allowing members approaching pensionable age to shop around for annuity.
It added that, if this did not achieve certain goals set out by the government, then the introduction of a national annuity support and brokerage system should be considered.
The report continued that there was a "severe lack" of transparency in the market, with advisers interviewed for the report claiming that insurers pushed rates down when they saw a group of retirees approaching, as they expected the incoming pensioners would not shop around.
The director of PI, David Blake, called the report a "wake-up call" to the pensions industry, while the NAPF's chief executive Joanne Segars said the annuity market "desperately" needed to be straightened out.
"People are saving throughout their working lives only to end up short-changed by a toxic system," she said.
"Every year, a billion pounds that could have been paid out in pensions instead disappears down the plughole of a murky annuity market."
She said this fate particularly affected lower and middle-income earners.
Referencing the imminent introduction of auto-enrolment, she said: "There is no point in encouraging people to save if we do not help them get the most out of their savings."
Segars also called for more transparency in pricing and structure.
"The government and the industry must work harder to create a clearer, fairer system that delivers better value for money," she said.
Blake added: "If the annuity system is not radically overhauled, employees in defined contribution schemes in the private sector will continue to suffer massive detriment, and the government's new auto enrolment regime will fail the very people it aims to help secure financial independence in retirement."