Around 8 per cent of retirees aged 55 and older regret withdrawing from their pension before leaving full-time work with nearly half receiving no advice or guidance and only 27 per cent consulting a regulated financial adviser, according to Just Group.
According to a survey of 1,050 retirees over the age of 55 revealed that 28 per cent had withdrawn pension cash, either as a lump sum or through income drawdown, between the ages of 55 and retirement.
The FCA’s most recent Retirement Income Market Survey shows that 37 per cent of those who entered drawdown in the year ending March 2023 did so without guidance, a 16 per cent rise over the previous year.
Meanwhile, more than half of individuals who bought an annuity in the fiscal year ending March 2023 did so without advice or guidance, up from 41 per cent the previous year. Only 10 per cent of individuals withdrawing their pension used Pension Wise, a free and unbiased government-sponsored service.
According to Just Group, this raises questions regarding the efficacy of the ‘stronger nudge’ programmes launched in 2022, as well as the influence of improved wake-up packs in meeting the government’s goal of making guidance the norm.
Just Group group communications director Stephen Lowe says: “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 these 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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