The maximum you can currently claim on a state pension is £122.30 a week, which adds up to £6,359.60 – a sum most would struggle to live on.
This means private pensions are relied upon by most Britons to top up their finances after they retire.
However, there are strong concerns that the previous pension freedom reform will leave many in dire straits in their later years.
Pension freedoms allow Britons to take money from their pension ahead of time. This is known as income draw down. As from April 2015 there was no limit as to what you could take from a type of private pension known as your defined contributions pension scheme.
Martin Lewis recently revealed how you could have a £21,000 hidden pension you didn’t know about.
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MPs have now announced an inquiry into pension freedom, as there are growing concerns over whether people are protected from making financial designs they will later regret and that will leave them struggling in poverty.
The decision was prompted by the fact that £43 million in pension savings has already been lost to fraud since pension freedom was introduced.
Just yesterday Express.co.uk reported how unscrupulous fraudsters are targeting savers who are now allowed to move or access their pension pots.
What is more, only seven per cent of people who are drawing down pension savings used a free service, while others used methods that charged them to do so.
The inquiry will look at what people are chosing to do with their pensions.
A retirement legal expert welcomed the move. Chris Knight, managing director at Legal & General Retail Retirement, said: “Pensions freedoms was a giant leap in the dark – so a review is well-timed and appropriate.
“Whilst it has done a lot of good – not least of which is raising consumer awareness about their retirement options – there is no question that Pensions Freedoms also has its imperfections.
“Consumers might have more choice about how they use their pension pot, but thousands of individuals continue to approach retirement without receiving advice or planning ahead, and as a result take the path of least resistance by sleepwalking into drawdown by default.”
He claims that pensioners need education about how to use their pension, so as not to spend in the short term and leave themselves vulnerable later.
He added: “We need to get people thinking about and understanding what Pensions Freedoms really means for their retirement and how they can use their pension pot strategically, not just on day one of retirement, but potentially for the next 30 years. That means encouraging, where appropriate, a blended approach which mixes the benefits of drawdown with the insurance against longevity offered with an annuity.
“The Select Committee’s inquiry presents an excellent opportunity for the Government to address the imperfections of Pensions Freedoms, clarification of the implementation of regulation and laws around ‘Freedom & Choice’ and ultimately provide clearer pathways to consumers when it comes to making decisions about their retirement income.”
Despite the fact that many older Britons were keen to have the freedom to access their pensions earlier, to do what they want with their savings, they are now making mistakes when it comes to taking the money out early.
The number of people choosing to draw money from their savings has trebled since pension freedoms were introduced in 2015, according to provider Aegon.
What is more, a quarter of Britons claim to have no understanding of how the UK pension system works.