Half of pension pots accessed without advice

Are the alarm bells ringing on your pension?

According to the latest official figures, nearly half of pension pots were accessed without individuals taking any regulated advice beforehand.

The latest data from the Financial Conduct Authority on the retirement income market revealed that only 15% of pots were accessed by people who received Pension Wise guidance.

According to the FCA’s 2018/19 report, 48% of pension plans were accessed without regulated advice or guidance being taken by the holder.

This compared with 37% of plans accessed by plan holders who took regulated advice.

Between 1 April 2018 and 31 March 2019, 645,000 pension pots were accessed to buy an annuity, move into drawdown or take a first cash withdrawal.

The data showed that over 350,000 pension pots were fully withdrawn at the first time of access - 90% of which were worth less than £30,000.

The average value of pots fully withdrawn at first access in 2018/19 was £13,000.

The FCA’s analysis shows that taking advice generally depends on the size of the pension pot.

While 70% of consumers with pot sizes of £100,000 and over sought regulated advice, only 20% of those with less than £10,000 in pension savings did.

The FCA have voiced concerns with the reduction in the number of people seeking advice, with 34% taking no advice whatsoever.

Stephen Lowe, group communications director at Just Group said alarm bells should be sounding.

“Even where pension money is left invested and regular sums taken, the withdrawal rates are far higher than most experts would consider sustainable for a long-term investment such as a pension”, said Mr. Lowe.

“The FCA figures show that four in 10 drawdown customers took more than 8 percent of the fund value a year although for those with funds of less than £50,000 this rises to nearly two-thirds (63 percent)."

"Overall 74 percent of people are taking more than 4 percent of the fund value each year."

“This contrasts with guidance from organisations such as the Institute of Faculty of Actuaries suggesting 3.5 percent would be more a more suitable drawdown rate for a 65-year-old and 3 percent for a 55-year-old.”

Keith Richards, CEO of professional body the Personal Finance Society (PFS), also noted how concerning these new figures are. Mr. Richards said:

“It is deeply concerning how many people are pulling all their cash from their pension pots without advice or guidance, and the potentially catastrophic poor outcome for thousands of consumers must be acknowledged as a failing of government and regulator to deliver clear guidance for the public.”

“The PFS would like to see the government and the FCA do more to make sure providers are signposting guidance services and advice, and explaining the potential ramifications if you don't seek assistance.”

Want to talk to a professional about your pension? We can help!

If you’d like to speak to someone about your pension before accessing your savings, we can help.

We have a dedicated team of highly trained experts on hand to help you make the most of your pension.

So, if you’ve not reviewed your pension in the last 12 months or you’d simply like some free friendly advice from a professional, click here.

Alternatively, call 0161 443 4840 to get in touch or click her

People who do not take advice about their pension are more likely to run out of funds than those who take professional advice

If you take an income from your pension without advice, there’s a risk you could run out of funds due to the alarmingly high withdrawal rates.

The latest data from Moneyfacts suggests retirees are withdrawing their money at unsustainable rates.

Related Link: Financial Calculators 

The research found that 70% of people who withdraw an annual income from their pension withdrew 4% or more of the value, almost 30% withdrew 8% or more, and around 13% have fully exhausted their fund.

The study also states that those who do not take advice are more likely to run out of funds than those who seek professional advice.

According to Moneyfacts, there are three times more non-advised drawdown customers with fully depleted funds than those who have sought professional advice.

Need to talk to someone about your pension? Talk to us!

It can be difficult to understand your options, but we’re here to help.

Here at Edward Mellor we have spent more than 30 years serving our clients’ ongoing financial needs.

If you’d like to speak to someone about your pension, we have a dedicated team of highly trained experts on hand to help you make the most of your money. Simply complete our online form to receive free and friendly advice from a professional.

Alternatively, call us on 0161 443 4840 or email us at pensions@edwardmellor.co.uk.

Related Links

FCA finds half of pension pots accessed without advice

Retirees in drawdown ‘withdrawing too much from their pension’