THE Government is ordering pension fund managers to come clean about hidden costs which can wipe tens of thousands of pounds off the value of retirement pots.

Pensions Minister Steve Webb said transparency in workplace defined contribution schemes was crucial so people could make good financial decisions.

The Office of Fair Trading (OFT) warned last year that there was "insufficient visibility and comparability of charges" to ensure that competition in the market was fully effective.

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In a written statement to MPs, Mr Webb said in future ministers would be under a statutory obligation to create rules to ensure transaction costs were more open. An amendment will be introduced to the Pensions Bill in the House of Lords tomorrow.

Mr Webb said: "Transparency of costs and charges is fundamental for good scheme governance and to enabling comparison between schemes.

"Requiring increased transparency is the latest step in the wider Government programme to see fair charges for people who are automatically enrolled into workplace pensions."

The Government has said someone who saves £100 a month over a 46-year working lifetime may lose £170,000 from their pension pot with a 1% charge and more than £230,000 with a 1.5% charge.

Shadow pensions minister Gregg McClymont said: "The Government appears to have backed down under Labour pressure on transparency over costs and charges, but ministers are only implementing half of Labour's reform agenda."

The executive director of consumer organisation Which?, Richard Lloyd, said this move alone "will not be enough to end rip-off schemes as consumers are often automatically enrolled by their employer". He added: "We also need to see a cap on charges of 0.5%."