However, there were signs a minority may be withdrawing too much too soon and at rates that would see their money run out in a decade or less, if they are reliant on their pension pot as their main source of income.
In the last quarter, 4 per cent of pots had 10 per cent or more withdrawn, and many others took their whole pot in one go.
Rate of withdrawal for drawdown and lump sums in Q1 2016
| Withdrawal rates | Total number of pots where withdrawals taken |
|---|
| Less than 1% withdrawal | 45,641 |
| 1-1.99% withdrawal | 16,134 |
| 2-3.99% withdrawal | 10,500 |
| 4-5.99% withdrawal | 1,822 |
| 6-7.99% withdrawal | 1,423 |
| 8-9.99% withdrawal | 835 |
| Equal or greater than 10% withdrawal | 3,379 |
| Total plan holders making partial withdrawals | 79,734 |
Clearly the government needed to come up with a way to make sure more people seek advice over what to do with their retirement savings pot but will this pension allowance achieve that?
To start with, what is the point of the government shouting from the rooftops that people can access their pension pots to pay for advice if providers are unable to offer savers access to their pots to fund financial advice from April?
As revealed in Financial Adviser earlier this month – you should not get your hopes up that access to this tax-free pension advice allowance will be widespread for your clients come April 2017.
As Financial Adviser’s 9 February 2017 front page news story revealed most providers will be incapable of delivering the allowance.
Pension policies issued before the introduction of the Retail Distribution Review typically do not allow for customer-agreed remuneration.
But even if providers can manage to get their systems in order to allow savers to pull £500 three times out of pots to pay for financial advice, what will this achieve?
According to HM Treasury’s own analysis, face-to-face advice costs £150 per hour on average, and can take up to nine hours for pensions.
This means even with the new tax-free pensions advice allowance the average saver still might have to make up a shortfall of £850 to make sure they are making the most of their cash.
As Tom Selby, senior analyst at AJ Bell, says: “The sector is clearly evolving and innovative ‘robo-advice’ models may develop to help people assess their retirement options.
“But we are some way from that point at the moment and the government should not see the advice allowance as some sort of panacea that will magically solve the UK’s advice gap.”
Indeed Nici Audhlam-Gardiner, managing director of Saga Investment Services, fears the allowance rather than encouraging people who previously felt they couldn’t afford advice to seek it will just be of benefit to those who already pay for assistance.
Ms Audhlam-Gardiner says: “The challenge is to ensure that this doesn’t just become a subsidy for those who would have taken advice anyway.
