About a third (34 per cent) of the 62,000 savers who accessed their pensions via drawdown for the first time last year didn’t take financial advice, new research from the Association of British Insurers has found.
The analysis, which is based on the industry body's six-monthly retirement income data collection from its members, found that 11 per cent of this group received guidance from Pension Wise.
The ABI also found drawdown pots were getting larger.
At an average size of £120,000 this was the highest on record, while the proportion of customers reaching retirement with more than £250,000 also doubled in the space of just two years (to 11 per cent).
The industry body warned that by not accessing financial advice, thousands of retirees each month ran the risk of making "dangerous decisions" about what to do with the cash, which could eventually lead to them running out of money too early.
According to Yvonne Braun, ABI’s director of long-terms savings policy, pension freedoms gave consumers more options and flexibility in their retirement, but she cautioned "with greater choice comes greater risks".
She said: "To see levels of advice hitting new lows is disturbing, and risks leaving thousands of elderly consumers facing poverty later on in their retirement.
"New problems require new solutions, and empowering consumers to make the right decisions for them is our priority at the ABI which is why we are publishing new proposals on how to communicate with customers today."
At its annual Long-Term Savings Conference yesterday (June 3) in London, the industry body published two communications guidance documents.
The first paper, Tailored Risk Warnings, focuses on raising awareness of the risks that consumers face at different ages as they approach retirement.
It recommends that customers receive three different forms of risk warnings at ages 50, between 55 and 70, and at age 75.
The warnings cover scams and contributions for the younger groups, and tax, life expectancy and power of attorney risks for the older groups, the ABI stated.
The second document, Communications Through the Lifecourse, focuses on the opportunities during different stages of the customer’s life.
It highlights the need to speak to 18-25 year olds differently than to other age groups, in the same way that adults in their 50s will need to receive different messages as they draw closer to their retirement.
Rob Yuille, ABI’s head of long-term savings policy, noted that the days when "nearly everyone got a guaranteed income with their pension savings seem like a distant memory".
He said: "There’s now a need for a more tailored approach to the communications we send to customers to ensure that they’re aware of and informed about the new risks and opportunities that our evolving retirement ecosystem presents.
"It’s great that people are reaching retirement with greater amounts stashed away in their nest eggs, but we have to make sure that they’re armed with the information they need to make smart decisions about how to use it in the run up to, and during their retirement."