“The only negative take on that behaviour is where that is motivated by a lack of trust in pensions. On the whole though we are not worried about people doing horribly reckless things with these pots at the moment.
“Obviously what we need to do is stay close to the market and as it evolves and the size of defined contribution pots increases it will be interesting to see how the market evolves."
Darren Philp, director of policy and market engagement at The People’s Pension, said faced with a daunting array of options, many are simply cashing in their pensions and potentially getting hit by a triple whammy of a tax bill, missed investment growth and loss of other pension benefits.
“People need either better access to low-cost, trusted advice, tailored decision tools or a regulated default option to ensure they are not sleepwalking into a poorer retirement. Good quality default options will be a vitally important backstop for most people so they know that if they are unable to make a decision, they will still end up with a good solution.”
Former pensions minister Ros Altmann expressed disappointment that the FCA had found the pensions industry has so far failed to radically change its approach.
She said: “The pensions industry needs to wake up to the tremendous new opportunities offered by pension freedoms and auto enrolment. This is the time to show real innovative thinking in the customer interest but sadly the industry has so far failed.
"Where are the new products or default options?”
Tom Selby, senior analyst at AJ Bell, said: “While the general public and the government have clearly embraced the concept of freedom and choice in pensions, it seems the regulator is not as comfortable.
“The FCA’s findings suggest the vast majority of savers are using the pension freedoms sensibly and the market is working well for consumers. It is therefore puzzling to see the regulator float a series of market interventions, including ‘default’ funds for drawdown and charge caps.”