There are "massive" variations between annuity and pension plan policies, claims Informed Choices.

However, despite insurance companies being legally obliged to inform customers of the open market option, many consumers are not taking advantage of it, reports the advisory firm.

Martin Bamford, joint managing director of the company, said that it was "essential" for consumers to look into the open market but that "reasonably few" actually did so.

"People seem reasonably content just accepting the annuity rate that's on offer from their existing provider," he said.

Finance website This is Money claimed that of the 350,000 people who will have swapped their pension fund for a lifetime income by the end of this year, 70 per cent will regret their decision and wish they had been better informed.

It said it was a "scandal" and that many commentators believe government intervention is necessary.

© Adfero Ltd