Latest figures show that huge numbers of Britons preparing to stop work are taking advantage of new rules allowing them to draw cash sums early but are being ripped off by unnecessary fees.

Savers who withdraw regular chunks of cash from their pensions risk tens of thousands of pounds being gobbled up by expensive charges handed out by insurance firms. 

As a result, many face running out of cash earlier than they had anticipated - leading to a bleaker retirement than if they had simply shopped around for a better deal.

Campaigners last night warned that insurers are hitting loyal customers with the hefty fees when they try to use the new pension freedoms to dip into their pots.

Former Pensions Minister Ros Altmann explained: “It is really vital that people considering moving their pension into a drawdown fund check all the charges first. 

“It is really important to realise that some pension companies will cost you much more than others and each time you take money out you may be charged. 

“I would recommend everyone to call PensionWise first. The government has set up this free service to help you understand your pension choices and explain the risks of different options.”

Under the new reforms, ushered in in 2015, at the age of 55, workers can now start drawing down lump sums from their pension pots. 

However, latest figures show that some six in ten people using the reforms to treat their funds like cash machines are being rolled on to their existing provider’s deal rather than shopping around, according to the City watchdog. 

Experts warned that this means many are not getting the best deal, and are being hit by fees far higher than necessary. 

This is because in most cases, insurers offer to move savers’ cash into a small range of investment funds - unless the customer makes a special request. 

But few savers realise there is a huge difference between the charges on the cheapest and most expensive plans on offer.

In addition, the confusing way in which insurers are levying the charges makes it almost impossible for customers to compare the true costs.

Dr Altmann added: “If people’s money is being whittled away by charges, their pension is not going to deliver what they hoped. 

“There needs to be some proper controls of this area. It’s vital that the City watchdog gets on top of it straight away. 

“There are already strict limits to how much pension firms are allowed to charge customers when they are working - and it’s equally important they are not overcharged in retirement.”

Those who fail to shop around for a better deal face losing thousands in extra fees from a £100,000 fund over a 20-year retirement. 

If a pensioner’s pot is fed into an expensive fund by default they could also run out of cash up to five years earlier than if they switched plans. 

Personal finance specialists last night warned that those facing retirement must not be scared to shop around for the best deal - and to take advice if unsure.

The huge numbers of people losing out currently was simply not acceptable, they added.

Pensions expert Billy Burrows, of the advisers Better Retirement, said: “These figures highlight the crucial importance of shopping around for the best deal you can find and not taking the first thing you are offered. 

“The difference in charges may not look big, but over time can eat away at your pot.”

Last night a spokeswoman for the Department of Work and Pensions said: “Pension freedoms give people choice over how they use their hard-earned savings, but it is important that they are aware of any charges and the tax implications.

“Earlier this year, we introduced a cap on early exit charges to ensure people are not forced to pay higher than necessary penalties for accessing their own money.”