A combination of choosing the wrong annuity and high pension fund charges could could cut pension income by almost a quarter (24%) according to a report from the National Association of Pension Funds and the Pensions Policy Institute (PPI).
The report also suggested that pension savers should shop around to get the best annuity rates and pension fund options, or they could end up working into their 70s to meet the all the costs of retirement.
Taking the lowest available annuity rate on the market would reduce pension income by 12% when compared to a 'best buy' product the report said, and pension savers with high pension fund charges, such as those saving through certain types of stakeholder pension, could have to work for several years longer to make up for the loss seen through additional costs.
Joanne Segars, NAPF Chief Executive, said:
"People are not powerless when it comes to their pension. By making the right moves they can get a lot more for their money without having to pay any more in.
"High charges can eat away at a savings pot and both workers and employers should try to keep them down. The annuity system can seem complicated but savers can help themselves by shopping around to get the best possible rate.
"People who don't get the best out of their pension could end up stuck at work for years longer than they planned. Getting a good deal on charges and annuities can mean the difference between enjoying retirement and spending years more at the desk.
"There are a host of things people can do to secure a decent pension for their old age. Starting to save into a pension from an earlier age, extending one's working life and increasing pension contributions can all make a big difference."