The survey of 1,050 retired over 55s found that nearly three in 10 (28%) had withdrawn pension cash between the age of 55 and when they finished working full time, either as a lump sum (tax-free or not) or via income drawdown.
Nearly half (49%) of this group said that they had not received any advice or guidance prior to making the decision to withdraw from their pension pot before retiring from full-time work, raising concerns over the support available to people making these complex decisions. A little over a quarter (27%) spoke with a regulated financial adviser before deciding to dip into their pension.
It follows the FCA’s latest Retirement Income market survey which signalled that over a third (37%) of people who entered drawdown in the 12 months to March 2023 did not seek or use any advice and the number of people entering drawdown without advice or guidance rose by 16% between the 12 months to March 2022 and the 12 months to March 2023.
For those purchasing annuities, more than half (57%) of those who purchased an annuity in the 12 months to March 2023 did not use any advice or guidance, compared to 41% in the 12 months to March 2022.
Only one in 10 pension dippers used Pension Wise, either through a telephone appointment or face to face, despite it being a free, independent, impartial and government-backed service. This raises serious questions about the effectiveness of the ‘stronger nudge’ initiatives introduced in 2022, and the impact of revised wake-up packs, to meet the government’s stated ambition of making guidance ‘the norm’.
Commenting on the data, Stephen Lowe, group communications director at retirement specialist Just Group, said: “It's alarming that a significant portion of retirees are diving into their pension before leaving full-time work without the benefit of any financial advice or guidance.
"The cost-of-living crisis, rising rent prices and hiked interest rates have all put a significant strain on household finances over the past few years, and for many, pension cash has been a valuable financial resource to fall back on, particularly for those who have faced health problems or redundancy prior to retiring.
“For some pre-retirees, tapping into their pension pot before retiring from full-time work may be a sound decision, but it’s inevitable that without advice and guidance some people will make decisions they’ll come to regret. Much more needs to be done to stop so many falling through the cracks in the advice and guidance framework that the government and regulator have put in place.
“We would urge anybody considering dipping into their pension to make use of the government-backed, free, independent and impartial service – Pension Wise. It’s the lifebelt George Osborne promised every saver when pension freedoms were announced but only the rare few use it.”
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