Pensioners taking cash out of their retirement pots shun advice even when free.
A record number of pension savers took money from their pots last year, but most did so unadvised – raising concerns they may make bad retirement decisions.
More than 673,000 defined contribution pensions were accessed in 2019/20, a record, according to retirement finance firm Just.
The majority – more than 340,000 – were taken without regulated advice or guidance.
For those making a full withdrawal of their cash, the proportion doing so without any advice or guidance rose to 64%.
Experts are warning pensioners acting to withdraw cash without guidance are more likely to fall prey to scammers.
One in 10 UK adults reported either knowing someone or admitting they have fallen for a scam since the start of the Covid-19 outbreak, research by insurer Canada Life found.
Stephen Lowe, group communications director at Just, said:
“Dipping into pension money is becoming more popular but most people are shunning the professional support that is available to help them make good choices, even when that support is free.”
Free support comes in the form of Pension Wise, the government’s impartial retirement guidance body, which is available to anyone over 50 who wants to discuss the options for taking their pension cash. However, fewer pension savers are using the service.
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The proportion of savers using Pension Wise slipped from 15% to 14% for all defined contribution pensions being accessed in 2019/20, according to Just’s figures.
For those where some cash was taken and the rest of the pension money put into a drawdown plan, fewer than one in 10 savers went to Pension Wise for guidance.
Yet separate research by Just found demand for independent guidance is strong among those nearing retirement. Two-thirds of all 45-54 year-olds said they wanted impartial guidance if it was free, rising to 77% for those with defined contribution pensions.
Experts are calling on regulator the Financial Conduct Authority to do much more to raise awareness of Pension Wise. Commentators are also calling for an ‘opt-out’ system so more pension savers are nudged to take free guidance and become better prepared to make retirement decisions.
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Baroness Altmann, a former pension minister, said: “When the Pension Freedoms were announced, the intention was that everyone would have free impartial guidance to help them make good decisions about their pension savings. “Unfortunately, take-up of Pension Wise guidance is far too low and this leaves consumers more vulnerable.”
Pension guidance is the solution ‘hidden in plain sight’ to protect pension savers against the growing menace of fraudsters, according to Just. More than half (62%) of those polled by Canada Life felt the scams are so convincing they are hard to spot on their own.
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