Pension freedoms have let more than half of retirement savers cash in their pots during the past year, says official research.
The findings came from the Financial Conduct Authority, the government agency regulating pension providers.
The FCA revealed that in the last three months of 2015, 52% of pension savers withdrew their full savings or large cash withdrawals with uncrystallised lump sum, flex-access or small pot lump sum payments.
Just over one in 10 savers aged between 55 and 60 years old took 10% or more of their pension after deducting the 25% tax-free lump sum.
The average full cash drawdown was £25,000 since pension freedoms were introduced in April 2015.
Professional advice shunned
The FCA Retirement Outcomes Review lists some concerns about how savers are accessing their money.
“We highlighted concerns regarding the ability of consumers to make informed decisions and place competitive pressure on firms in light of increased choice and complexity and increased mass market access to higher-risk products.
“The developments outlined above suggest that these concerns are being borne out in practice.”
The research showed a huge rise in the number of consumers making financial decisions about their pensions without consulting a professional adviser.
In 2013, 97% of consumers took advice about pension drawdown.
By the end of 2015, this had dropped to two-thirds.
Missing out on income
The FCA suggests that the change is due to pre-pension freedom savers having larger pots and the cash to pay for professional advice, whereas post pension freedom savers have smaller funds and are less keen to pay advice fees starting at an average £900.
The FCA is reviewing how the pension market works for consumers as the number of over 65s is likely to increase by more than 1 million over the next five years and the watchdog wants to see more competition between annuity providers and how to simplify information and products.
The study for Q4 2015, voiced concerns that many consumers might miss out on a larger retirement income because they fail to shop around for the best deal.
The figures disclosed 53% of income drawdown products and 57% of annuities were to existing customers.
