The UK pension system is not working properly, according to a study of 25 firms by the Financial Conduct Authority (FCA).

The watchdog blames this failing on the annuities market, which they say puts 80% of pensioners out of pocket.

An annuity pays out a monthly sum on top of the state pension based on how much money a person has paid into a pension scheme over the course of their life.

The study found that 60% of retirees bought an annuity from the same company that provided their pension plan. This meant losing out on 6.8% more money, which they could have had if they’d shopped around.

Martin Wheatley, chief executive of the FCA, told the BBC:

“The need to get an income in retirement unites us all. But once you’ve bought an annuity you can’t change your mind… We need to understand why [retirees] aren’t shopping around and switching.”

Mr Wheatley added that buying an annuity was simply too complicated and that information wasn’t provided in a way to help retirees make good choices.

The FCA have today launched a detailed investigation, which will assess competition in the market, with the aim to publish possible solutions within a year.