Nearly half of pension pots were accessed without individuals taking any regulated advice beforehand, according to latest official figures.
Latest data on the retirement income market from the Financial Conduct Authority, published today (September 25), showed from April 1, 2018 to March 31, 2019, 48 per cent of pension plans were accessed without regulated advice or guidance being taken by the holder, while 15 per cent of pots were accessed by people who received Pension Wise guidance.
This compared with 37 per cent of plans accessed by plan holders who took regulated advice.
For around 45 per cent of plans where the holder bought an annuity or took a partial lump sum withdrawal they received no regulated advice or guidance, rising to 62 per cent for plans that were fully withdrawn at first access.
For pots entering drawdown, 34 per cent of individuals did not take regulated advice, although 9 per cent sought guidance from Pension Wise.
However, this was an increase from the 31 per cent seen in 2017/18.
According to the regulator, taking advice increases with the size of the pension pot as 7 in 10 consumers with pot sizes of £100,000 and over sought regulated advice compared with two in 10 consumers with a pot size of less than £10,000.
The data also showed that over 350,000 pension pots were fully withdrawn at the first time of access - 90 per cent of which were worth less than £30,000.
The average value of pots fully withdrawn at first access in 2018/19 was £13,000.
Stephen Lowe, group communications director at Just Group said alarm bells should be ringing.
Mr Lowe said: “Even where pension money is left invested and regular sums taken, the withdrawal rates are far higher than most experts would consider sustainable for a long-term investment such as a pension.
“The FCA figures show that four in 10 drawdown customers took more than 8 per cent of the fund value a year although for those with funds of less than £50,000 this rises to nearly two-thirds (63 per cent). Overall 74 per cent of people are taking more than 4 per cent of the fund value each year.
“This contrasts with guidance from organisations such as the Institute of Faculty of Actuaries suggesting 3.5 per cent would be more a more suitable drawdown rate for a 65-year-old and 3 per cent for a 55-year-old.”
The data also confirmed that more individuals have shifted from buying annuities to using drawdown.
From April 2018 to March 2019 over 190,000 plans entered drawdown and were not fully withdrawn but less than 74,000 annuities were bought in the same period.
Tom Selby, senior analyst at AJ Bell, said: “These figures demonstrate the enduring popularity of the pension freedoms, with almost three people taking a regular income through drawdown for every one person buying an annuity. This represents a monumental shift in retirement behaviour the impact of which will be felt across the UK economy.”
Mr Selby also said it was encouraging that as pension funds get larger and the tax impact of significant withdrawals becomes potentially greater, fewer people were taking 8 per cent or more from their fund.