The annuities market is not working for consumers, the Financial Conduct Authority has concluded after an extensive review.

As a result it is launching a competition market study in an attempt to find out why so many consumers don't shop around, despite the fact that one in six people could increase their retirement income by 10 per cent.

Annuities convert pensions pots into retirement income, but the market is "disorderly", according to Martin Wheatley, the FCA's chief executive.

"Once you've bought an annuity you can't change your mind but for most people getting the right one could mean the equivalent of an extra £1,500 in savings," he pointed out. The review also showed that there is virtually no market for people with smaller pension pots.

The study will examine how pension provider sales teams conduct themselves when selling annuities. Sales have been widely criticised, so the launch of the review was welcomed. But critics said the FCA should act immediately.

Andrew Tully of MGM Advantage said: "The review doesn't go far enough, or act quickly enough. This will potentially leave many thousands of retirees high and dry when navigating the annuity minefield."

The pensions expert Ros Altmann added: "We need immediate action as more than 1,000 people every week are buying annuities and the transactions are irreversible."

The FCA said it will publish its initial findings in the summer and the final competition market study report within 12 months.