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‘Significant’ portion of people dive into pension without advice

‘Significant’ portion of people dive into pension without advice
Paloma Kubiak
Written By:
Paloma Kubiak

Half of the people who dipped into their pension ahead of retiring admit to not getting advice or guidance, leaving some regretting their decision.

One in 10 retirees aged 55+ who withdrew money from their pension before leaving full-time work, said they regret the move.

Nearly a third had withdrawn pension cash between the age of 55 and when they finished working full time, either as a lump sum (tax-free or not) or via income drawdown.

However, nearly half of this group said 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.

According to retirement specialist Just Group which surveyed 1,050 individuals aged 55 and over, this raises concerns over the support available to people making these “complex decisions”.

Meanwhile, a little over a quarter of individuals spoke with a regulated financial adviser before deciding to dip into their pension.

It comes as the regulator, the Financial Conduct Authority’s latest Retirement Income market survey revealed that over a third (37%) of people who entered drawdown in the 12 months to March 2023 did not seek or use any advice. This has risen 16% between the 12 months to March 2022 and the 12 months to March 2023.

When it comes to annuities, more than half (57%) of those who bought an annuity in the 12 months to March 2023 didn’t use any advice or guidance, compared to 41% in the 12 months to March 2022.

Just one in 10 pension dippers used the free and independent Pension Wise, either through a phone appointment or face to face.

Just Group said “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’.”

‘Stop people falling through the cracks in framework’

Stephen Lowe, group communications director at 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.

“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.”

Lowe suggests that anyone considering dipping into their pension make use of the Government-backed, free, independent and impartial service – Pension Wise.

Alternatively, there are a range of resources to provide information and guidance, including organisations such as MoneyHelper and charities such as Citizens Advice and Age UK.

Professional advisers will charge but can provide regulated advice alongside information about benefit eligibility, Lowe added.