Recent research from the Association of British Insurers (ABI) found that more than a third of retirees have not taken any financial advice before accessing their pension.
34% of the 62,376 people who entered drawdown for the first time between April and September 2018 had received no advice. The average value of the pension pot accessed in that time was £120,000 – almost double the 2016 average.
According to a warning from the ABI, this could result in savers making “dangerous decisions” surrounding the large sums to which they have access, possibly leading to them running out of money in retirement.
Yvonne Braun, Director of Long-term Savings Policy at ABI, said:
"Pension freedoms gave consumers many more options and flexibility in their retirement, but with greater choice comes greater risks.
"To see levels of advice hitting new lows is disturbing and risks leaving thousands of elderly consumers facing poverty later on in their retirement."
This view is further supported by separate research from the World Economic Forum (WEF), which found that the average retiree in the UK is likely to outlive their retirement savings by 10 years or more.
Women are expected to be most affected, outliving their savings by an average of 12.6 years, compared to 10.3 years for men.
The WEF report recommended that governments should make changes to pension regulations to help address the retirement savings gap. However, individuals should also take responsibility for their retirement income. Han Yik, Head of Institutional Investors at the WEF, said:
"As people are living longer, they must ensure they have enough retirement funds to last them through their longer lives.
"This requires investing with a long-term mindset earlier in life to increase total savings later on."
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