A crackdown on the pensions market has been ordered by the trading watchdog as it warned that billions of pounds of savers' cash is already at risk of delivering poor value for money.
The Office of Fair Trading (OFT) made a raft of recommendations to make sure that up to nine million people who will be saving into defined contribution (DC) workplace pensions in the coming years do not find their money being gobbled up by rip-off charges.
But consumer campaigners said further action is needed to "prevent billions of pounds of consumers' money from languishing in poor-value schemes".
Up to £40 billion-worth of pension savings could already be in schemes which are delivering poor value or are at risk of doing so, the OFT warned.
Around £275 billion of assets is currently held in DC schemes, but this is set to at least double by 2022 as the Government's automatic enrolment scheme is rolled out to encourage more people to save for their later years.
Confidence in pension saving is seen as vital to the scheme being a success - but a report produced by the OFT found that "most employees do not engage with, or understand, their pensions".
The OFT, which looked at how well competition works, said the buyer side of this market is "one of the weakest" it has seen in recent years.
It advised the Government to look at improving the transparency and comparability of different schemes, to make it easier for employers to make the right choice.
The Government should also look at preventing schemes being used for automatic enrolment which ramp up management costs for people when they stop contributing to their pensions, perhaps because they have changed jobs, the OFT said.
The Pensions Regulator will take "rapid action" to look at whether some smaller schemes are not delivering good value and it could be given new enforcement powers to clamp down on this.
The Association of British Insurers (ABI) has also agreed to an immediate audit of old and high-charging schemes which the OFT fears may not be delivering value for money.
Clive Maxwell, OFT chief executive, said that with auto-enrolment already under way, the measures should be introduced "rapidly".
The OFT warned that some older schemes set up before 2001 have management charges that can be much higher than newer schemes.
It estimates that annual management charges on schemes sold before 2001 are around 26% higher than those sold at a later date.
Small differences to these charges, which are levied as a percentage of scheme members' accumulated savings every year, can make a huge difference to the eventual size of pension pots.
The report said that, for example, a 0.5% annual management charge over an employee's working life could reduce the overall value of retirement savings by around 11% - but a 1% charge could reduce it by around one fifth (21%).
The OFT stopped short of recommending a cap on charges for now. It could in theory have referred the sector for a full-blown Competition Commission inquiry, but it has provisionally decided that in the light of the steps now being taken, a referral is not appropriate.
Which? executive director Richard Lloyd said: "Unfortunately t he Office of Fair Trading's recommendations don't go far enough to prevent billions of pounds of consumers' money from languishing in poor-value schemes.
"The Government must go further and set high-quality minimum standards for all workplace pensions as soon as possible, including a cap on all charges."
The OFT's report said there is little that the employee can do to influence their employer's choice of pension scheme or ensure they get compensation for a bad decision.
Significantly, many employers were found to lack the knowledge and understanding to get the best value from pensions.
Some employers could favour certain pension schemes because they offer low admin costs, possibly at the expense of other factors which would give workers' pension pots better value for money.
"Overall, it appears that employees do not have the mechanisms, the motivation, or the understanding to drive competition on the key elements of value for money," the report said.
Minister for Pensions Steve Webb said: " This report outlines further important ways to help consumers, and we will act on its recommendations.
"In particular, we need to ensure those already in pension schemes are getting good value for money, and will be actively involved in the audit of pension schemes sold prior to 2001.
"We will consult shortly on the full range of options to protect consumers, including minimum scheme standards, and further action on charges and charge transparency."
Workers aged between 22 and the state pension age who are not members of a workplace pension are being signed up to one under the Government's plans to head off a looming retirement savings crisis feared as people live longer but fail to put enough money away for their old age.
Auto-enrolment started last autumn with larger firms and early indications have shown the scheme to be a success, with nine out of 10 people who have been put into a pension scheme so far staying in.
Otto Thoresen, director general of the ABI, said: " The schemes principally identified by the OFT as potentially having charges not representing good value for money account for around 10% of the nearly £300 billion assets managed by the industry, including closed schemes and schemes that will not be used for automatic enrolment.
"But we agree with the OFT that it is important to review charges to ensure they represent good value for money for today's employers and savers. Pension providers have agreed to an audit of all legacy and higher charging schemes to ensure any problems can be sorted out."