Savers seeking to access their pensions without taking financial advice risk paying too much tax and higher charges when accessing their funds, national firm LEBC warned.
Speaking at the Westminster and City Retirement Income Solutions Conference in London today (December 6), Kay Ingram (pictured), director of public policy, stressed retirees could also fail to plan for longer term income needs and run out of funds in later life, suffering an income shortfall by failing to shop around.
Ms Ingram said: "It is important that those accessing their pensions, without regulated advice, understand that their product provider will not be responsible for decisions made when drawing down income from a pension plan.
"Unlike regulated advisers, who take responsibility for their recommendations and tailor solutions to an individual’s circumstances, pension providers can offer only a limited range of options from their own product suite."
Since the introduction of pension freedoms in 2015, savers with defined contribution pensions have the option to withdraw their funds from age 55 subject to tax paid at their marginal rate, rather than the 55 per cent charge previously in place.
FTAdviser reported this week that the UK government has been able to collect more taxes than anticipated through the pension freedoms due to a lack of knowledge from savers about pension withdrawals, according to a report from the Organisation for Economic Co-operation and Development (OECD).
In the UK, individuals "may not understand the consequences in terms of taxes paid of withdrawing funds from their pension account," it stated.
Ms Ingram also renewed LEBC’s call for a 30-day cooling off period to be introduced for those who access pension freedoms without advice.
She said: "Our experience in talking to thousands of retirees every year, tells us that many consumers do not understand the tax treatment of pension withdrawals.
"Many have been overtaxed by the provider using an emergency tax code, which is incorrect. Others do not realise the restrictions placed on future pension funding when more than the tax-free lump sum is withdrawn, potentially losing the benefit of employer sponsored pension funding.
"A cooling off period would enable them to be forewarned of these pitfalls instead of finding out when it is all too late."