Plans to end "rip-off" pension charges, which could wipe tens of thousands of pounds off your retirement savings pot, have been set out by the Government.

The Department for Work and Pensions (DWP) is considering banning all pension charges above 0.75% a year, to help give savers confidence they are getting good value for money (see our Pension Need-to-Knows guide for help on planning for your future).

But it is also thinking of other options, including capping charges at a higher 1% and a "two-tier" cap, which would involve a standard cap of 0.75% and a higher cap of 1% if employers can justify the additional charge.

The DWP is asking the industry and public for its views, before setting out final plans next year.

New pensions set up in 2012 charge an average of 0.51% per year. However, the Office of Fair Trading (OFT) estimates more than 186,000 pension funds charge more than 1%.

The Government says someone who saves £100 a month over a typical working lifetime of 46 years could lose almost £170,000 from their pension pot with a 1% charge and over £230,000 with a 1.5% charge.

The OFT called for a tougher clampdown on pension charges in a report last month, warning that "most employees do not engage with, or understand their pensions".

But it stopped short of recommending a cap, raising concerns about how costs would be defined and that pension providers may see a cap as a target to aim for rather than a maximum (see the Workplace pensions face shake-up MSE News story).

'Full-frontal assault'

Pensions Minister Steve Webb has said there is a "strong case" for imposing a pension charge cap.

Speaking yesterday, he said the Government was planning "a full frontal assault on pension scheme charges".

He added: "The Government believes that enough is enough on charges. People need to know they are getting value for money when they save into a pension and not being ripped off by excessive charges."

The Government's automatic enrolment reforms mean more workers are now saving into pensions. More than 1.7 million people have been placed into pension schemes so far under the scheme, which will eventually cover up to nine million people.