Four years after the introduction of pension freedoms, major concerns continue about the number of savers taking professional advice before drawing down or moving their savings, which could lead to some finding they run out of funds in retirement or making poor investment decisions.
More than £35 billion has been withdrawn from pension funds by over-55s since 2016: some £2.3 billion was withdrawn in the first three months of this year alone.
But new research from Openwork, one of the UK’s largest financial advice and investment networks, shows that more than half of advisers questioned (51%) say access to advice needs to improve to ensure the reforms continue to work well for savers while 56% of advisers worry about low levels of consumer understanding after four years.
Furthermore, they say that planned Government changes to pension rules could represent a major threat to consumer confidence going forward.
While many people are now seeking professional advice, more than two-thirds (68%) of advisers say retirement savers going into drawdown without advice is their key concern. Those with smaller pension pots are historically far less likely to ask for advice, and they are the cohort who face the most risk from running out of funds in later life.
Since the launch of pension freedoms more than 3.98 million people have taken out money with around 200,000 a year going into drawdown.
Advisers were asked to rate the biggest threat to consumer confidence in pension freedoms and consumers running out of money was identified as the biggest worry by 22%. However, that was closely followed by 18% of advisers warning about further Government changes to pension rules.
Mike Morrow, Wealth & Platform Director, said: “Pension freedoms have been a success based on the numbers of people wanting to access their money and the demand to take cash out of pensions.
“But four years down the line there are continuing worries about how well it is working in practice for retirement savers and advice is the missing link for making it a complete success.
“Retirement savers need help in making sure they receive the best value from their pension funds and increasing access to advice is vital to help maintain confidence in the system. The Government could also play its part by resisting the temptation to tinker with pensions regulation.”
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