The Virgin personal pension, which will be sold over the telephone, will impose a charge of pounds 2 on initial contributions, irrespective of their size. Annual management fees are 1 per cent.
Unlike pensions products from other life companies, Virgin said it would impose no penalties for stopping, changing, restarting, increasing or decreasing contributions.
For monthly contributions of pounds 250 lasting 15 years, the company claimed its charges to new customers would be about 10 per cent over the pension's lifetime, assuming 9 per cent growth a year, equal to Equitable Life.
By contrast, Prudential's charges would cost 14 per cent of a pension's payout and Barclays Life would charge 18 per cent over the same period.
Rowan Gormley, managing director of the Virgin Direct insurance business, said the company aimed to force the pensions industry out of its "complacency" with the new product.
"The impact will probably be quite disproportionate compared to the volumes we do, because existing products are opaque and charges are too high," he said.
"Now someone has set a standard for simple, straightforward low charges, there will be pressure to stand up to that."
But other companies claimed yesterday that Virgin's product, which invests in the same FTSE All Share tracker fund as its Growth PEP, could miss out of potential gains from world stock markets.
Nigel Emery, pensions marketing director at Save & Prosper, said: "Active management allows fund managers to choose which areas of both UK and world stock markets to invest in. If the UK does less well compared with other parts of the world, this will affect fund performance."Reuse content