Experts have given a stark pension warning after one person lost a staggering £80,000 due to a simple mistake. Cost-cutting shortcuts often lead to blunders, with pensions being one of the areas where experts advise against skimping on important services. In particular, skipping financial advice when it comes to your pension can “backfire spectacularly”.

Scott Gallacher, Director at Rowley Turton, revealed how easy it is to make a mistake when you attempt to do something yourself without the proper knowledge or experience. Explaining how you can run into issues when it comes to your pension, he told of an example when a client lost out on an eye-watering £80,000. He said: “Cutting costs by skipping financial advice can be a false economy.” According to the Money and Pensions Service, more than 45 million people in the UK have private pension funds, with varying amounts stored away for retirement.

Mr Turton revealed: “One DIY client ticked the wrong box when accessing his pension and lost £200,000 of tax-free cash – an £80,000 tax hit.

“This was a few years ago. He had an old occupational scheme but transferred benefit not as a ‘wind up’ or ‘buddy transfer’, and lost scheme-specific tax-free cash entitlement and was then limited to 25%.

“Another refused to pay our £500 fee for help encashing an offshore bond, only to lose £1,500 in unnecessary tax. Retiring without advice can mean missing out on enhanced annuities, costing up to 10% of your retirement income for the sake of 1% in fees.

“Clients also regularly overpay on mortgages by not using a broker, or stick with poor-value pensions and investments with high fees. The cost of advice is often dwarfed by the long-term value it adds – or the disasters it prevents.”

A recent government report suggested that future pensioners might be less well-off compared to those who are currently retired.

The UK government is set to revive the Pensions Commission in order to tackle this, while making a number of changes to pension rules. Retirees in 2050 are on course for £800 or 8% less private pension income than those retiring today, the report revealed.

Experts have listed a number of scenarios in which Brits should seek advice and proper services when it comes to finances. One of them is insurance, which they say should be considered carefully before buying into cheap deals.

“Shortcuts often lead to bigger bills. Skimpy insurance policies may not cover damages, leaving you to pay big out-of-pocket costs,” said Tony Redondo, Founder of Cosmos Currency Exchange.