Pension freedoms rules will face their peak test in the coming five years with nearly one million people expected to retire by 2020.
The most populous age-group in the UK today is those aged 51 – a total of 945,000 people according to the Office for National Statistics.
In 2020, these people will gain access to the pension freedoms, allowing them to take their entire pension pot in one go, subject to tax.
But a retirement rule of "no rules" for such a large cohort could offer problems ahead.
Alistair McQueen, head of savings & retirement at Aviva, believes people should be trusted with their own money, he added there is "the need for support and guidance in helping people make the right decisions about their financial future".
He points out: “In the tax year 2016/17, 393,000 individuals took advantage of the freedoms across the UK, withdrawing £6.45bn from their pensions. As the number of people reaching the age of 55 in the coming five years peaks – at 945,000 in 2020 – the pension freedoms will face their greatest test on whether they can offer a sustainable financial future.
“Recent government research identified that only one-in-three (34 per cent) people in the 45-to-54 age group had given any consideration to how many years of retirement they may need to fund.”
Advisers fear that all might not turn out well.
“The group of people coming up to retirement in 2020 will be the first cohort to build in the new flexibilities in their pension planning as the pension freedoms will have been in place for five years. It could be interesting to see the results which may not be entirely positive,” Darren Cooke, director at Red Circle Financial Planning, said.
Alan Lakey, director at Highclere Financial Services in Hemel Hempstead is also fearful that there could be trouble ahead:
“There is a concern, inasmuch as the pensions knowledge of the typical consumer is very low that their ability to understand consequences will lead many to make rash and ultimately bad decisions. Nonetheless, adults must accept the outcome if they do not take advice or are insistent.”
Mark Dodd, partner and chartered financial planner at London based Holden & Partners, said clients are keen to review all their options now.
But he maintained a note of caution: "I worry that people making these choices don’t always have the wider asset base to support longer term retirement income planning and don’t understand the complexities of what looks superficially simple”.