One in three retirees who have taken advantage of the pension freedoms and are leaving their money invested have no previous stock market experience.
The findings, from a survey carried out by YouGov on behalf of pension firm Zurich, also found that two in five of these first-time investors have chosen to go it alone and are not taking financial advice.
Those who choose to go down this route risk putting their retirement savings at jeopardy, Zurich warns. Alistair Wilson, a pensions expert at Zurich, says: ‘In the build-up to retirement, many savers rely on pension firms to make investment decisions on their behalf, meaning many have no hands-on investment experience when they take control of their pot.’
He adds: ‘For retirees not getting advice or guidance, there is a danger they could end up picking the wrong investments or taking money out of their pot too quickly. This is putting a worrying number of people at risk of running out of money in retirement.’
Wilson has called on the government to make it mandatory for financial advice to be sought for retirees tapping into drawdown.
The calls come three years on from the introduction of the pension freedoms, during which time use of drawdown has boomed and annuity sales have slumped. Nearly half a million people are using drawdown now (430,000), Zurich estimates, whereas less than 200,000 have bought an annuity. The figures show annuities are no longer the default route for generating retirement income.
Since pension freedoms came into force in April 2015 savers on the whole have been prudent, rather than rapidly blowing their pensions – a concern that was widely aired before the regulatory change.
But errors are being made, the most common being that people are withdrawing money from their pension pots and putting it into cash accounts, which on the whole are paying mediocre rates of interest that fail even to keep up with inflation, let alone provide real returns.
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