The proportion of defined contribution (DC) pension pots accessed without guidance or advice rose by 8 per cent in 2019/20, leading Just Group to call for systematic changes.
Figures from the Financial Conduct Authority (FCA) showed that a record 673,831 DC pensions were accessed for the first time during the year, with 50 per cent of this total being accessed without guidance or advice.
Just over a third (36 per cent) were accessed with regulated advice, while only 14 per cent were accessed after free guidance from Pension Wise.
The number accessed without consultation was 2 per cent higher than the year before and coincided with a “trend for people taking cash from a pension to go it alone”, according to Just.
Almost two-thirds (64 per cent) of schemes that saw a full withdrawal of funds belonged to pensioners who had not sought guidance or advice, while the same could be said for more than half (56 per cent) of schemes that saw withdrawal of an uncrystallised funds pension lump sum.
Just group communications director, Stephen Lowe, commented: “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.
“An entitlement to free, impartial and independent guidance was a key part of the 2015 reforms to help pension savers navigate the more complex environment, but usage remains low for now. Guidance enhances people’s understanding of the options available to them and develops confidence to make better choices and the insight to avoid scams.”
Consequently, Lowe urged the FCA to automatically book Pension Wise guidance sessions for pension savers.
Lowe concluded: “At the moment guidance is offered at the point that the carrot of cash is hanging right in front of people. It would be better to deliver the guidance earlier so people have a chance to think about the longer-term consequences.
“Our own research found only one in 25 people aged 45-54 would opt out of a guidance session pre-booked for them. This approach would be especially helpful for groups with lower financial capability and less engagement in pension decisions who are currently at greater risk of making poorer choices.”
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