Treasury warned fund managers have 'lost sight' of customers

Pensioners and savers are being deprived of thousands of pounds through high management fees that are often hidden, according to leaked advice provided by consultants to the Treasury.

The charges are so steep savers may find they get less back in retirement than they invested in savings accounts and pensions over their lifetimes, according to the Observer.

If the size of the charges were to become widely known, the UK's "fragile savings culture may be permanently damaged", according to the warning presented to the Treasury last month.

A source who has seen the presentation told the Observer that the conclusion was fund managers had "lost sight" of their customers and that the government needed to act.

The presentation suggested the country's pensions black hole - unfunded public and private pension commitments - could be wiped out over time if costs could be reduced, a source said.

"They are so high that the industry is actually destroying value for the UK investor at least as fast as the stock market can create it," the source said.

"The government's message is that you have to save for your retirement, but with the amount you will make it hardly makes it worthwhile if these costs are being taken out. And the highest cost of all are personnel costs, wages and bonuses."