The trading watchdog has made a string of recommendations to shake up the pensions market to make sure that millions of new savers do not sink their money into rip-off schemes.

The Office of Fair Trading has been carrying out a study into the £275 billion defined contribution (DC) workplace pensions market, to look at whether such schemes offer value for money, if there is enough pressure on providers to keep their charges low and what size of pension pot savers are likely to end up with at retirement.

It said that the Government should consult on improving the transparency and comparability of pension schemes to make it easier for employers to choose a scheme for their workers.

At present, employers "may often lack the capability or the incentive to assess value for money", it said.

The size of the sector is set for rapid growth over the next five years, as up to nine million people are automatically placed into a scheme by their employer as part of Government efforts to get people saving more for their later years.

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 minimum scheme standards, including further action on charges."

The OFT said the Government should look at preventing schemes being used for automatic enrolment which ramp up management costs for people when they stop contributing to their pension, perhaps because they have changed jobs.

The watchdog has also secured an agreement with industry and the Pensions Regulator, which works to prevent problems developing in the market, on a set of reforms.

The Pensions Regulator has agreed to take "rapid action" to look at whether some smaller schemes are not delivering good value and the Government has agreed that the pensions body 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 contain around £30 billion of savings and which the OFT said may not be delivering value for money.

The ABI has agreed that its members will set up independent governance committees to improve the scrutiny of schemes on workers' behalf.

These committees will be able to escalate problems to regulators if they are concerned that savers are at risk of getting a bad deal.

Clive Maxwell, OFT chief executive, said: "We have found problems in relying on competition to drive value for money for savers in this market.

"We've therefore worked closely with the Government, regulators and industry to agree a set of measures that we believe are an important step in helping to ensure that savers get better outcomes.

"It is important, particularly given that automatic enrolment is already under way, that these measures are implemented rapidly."

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."

Mr Thoresen said pension charges have already been driven down over the past decade due to factors such as the impact of new technology.

He said: "Pension charges are lower, more transparent and more understandable than ever before.

"This is good news for people saving into a pension. But it is important to remember that the level of contribution and how long someone works remain the most important factors in determining an individual's overall retirement income."

Committees will be set up by mid-2014 to oversee workplace pension schemes and they will be chaired independently and provide annual reports to pension company boards and a statement to the Pensions Regulator.

All ABI members offering workplace pensions will also be auditing the value for money of older pension schemes under a board representing Government, the OFT, regulators and the industry. This should be completed by December 2014.

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 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.

But fears had been raised that many people have little previous experience of pensions and smaller employers in particular could bring investors into schemes which do not represent a good deal.

Confidence among pension savers that they are getting value for money when they are placed into schemes is vital to the success of auto enrolment.

Joanne Segars, chief executive of the National Association of Pension Funds (NAPF), said: "The report has set the future course with the right long term principles to secure good outcomes for pension savers.

"But we feel that action is urgently needed now. With automatic enrolment under way we need to get things right now, not further down the line."