Retirees are being urged to tread carefully as fresh figures reveal a hidden danger that could leave pension pots running dry.
Experts warn that too many savers are making hasty decisions without guidance, just as fears grow over potential tax changes in Rachel Reeves’s Budget.
New data from the Financial Conduct Authority shows that fewer savers are seeking professional help before dipping into their pensions. Of the 962,000 pots accessed in 2024/25, only 31 per cent involved regulated financial advice.
The picture is even more worrying for drawdown plans, where retirees face the most risk. Just 45 per cent of the 350,000 people starting drawdown last year took advice, compared with two-thirds only six years ago.
Experts say this downward trend has persisted for six consecutive years, raising questions about whether people truly understand the long-term risks of their choices.
Stephen Lowe from retirement specialist Just Group warned that this fall in advice should be seen as a "red flag".
He said: "It is important that customers go into drawdown with their eyes open about the need to manage withdrawals to navigate the investment and longevity risk.
"Understanding these risks will help them improve the probabilities that their savings continue to deliver the income needed to last throughout their retirement."
At the same time, pension withdrawals have surged dramatically, with savers pulling £70billion from retirement funds in 2024-25 - a 36 per cent jump from the previous year's £52billion.
Tax-free withdrawals alone soared by 62 per cent, reaching £18.3 billion compared to £11.3billion previously.
Financial advisers attribute this spike to anxiety surrounding Chancellor Rachel Reeves's upcoming budget on November 26. Speculation about potential changes to pension tax relief has prompted many to act hastily.
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Pension savers warned of 'red flag' as thousands fall for 'common pitfall' that may ruin retirement
| GETTY"Pension pots were meant to last decades, not be raided in panic," warned Eamonn Prendergast, a chartered financial adviser at Palantir Financial Planning. He urged the government to provide clarity and dispel rumours early.
Rachel Vahey from investment platform AJ Bell expressed concern that "people aren't making decisions based on what's best for them but because they are worried about possible changes to pensions tax incentives."
Rising living costs may also be compelling more individuals to access pension funds for immediate expenses. Mr Lowe suggested that withdrawal patterns might also indicate fears that the Treasury could target tax-free cash allowances as an easy revenue source.
The government's Pension Wise service, despite offering free and impartial guidance, reached only 11 per cent of those accessing their retirement savings. This minimal engagement persists despite the service receiving high satisfaction ratings from those who do use it.
Financial advisers attribute this spike to anxiety surrounding Chancellor Rachel Reeves's upcoming budget on November 26
| PARegulators had pledged to develop improved methods, incentives and procedures to boost Pension Wise usage amongst pension savers. However, the latest statistics demonstrate no meaningful progress has been achieved in this area.
With nearly 60 per cent of pensions being accessed without any professional advice or guidance, concerns mount about retirees' preparedness for complex financial decisions.
Mr Lowe pleaded: "Anyone thinking of accessing a pension should seek regulated advice or, failing that, they should at least take guidance from Pension Wise which will help to sense-check their plans and make them aware of common pitfalls and scams."
The industry has been creating innovative advice models aimed at extending regulated support to broader audiences, whilst future targeted support mechanisms may assist additional savers in making informed choices.
Ensuring sufficient funds remain for later life proves essential
| GETTYThe inheritance tax modifications announced last October have intensified withdrawal activity, with defined contribution pensions set to fall within inheritance tax calculations from April 2027.
Previously exempt from estate valuations, this change has prompted affluent retirees to extract substantial sums for family holidays and gifts to children.
Mr Lowe acknowledged that whilst some wealthy individuals might avoid future tax bills through early withdrawals, ensuring sufficient funds remain for later life proves essential. He strongly advocated seeking regulated financial advice for anyone contemplating pension access.
"Retirement decisions are some of the trickiest financial decisions that people will ever face," Mr Lowe cautioned, emphasising that a decade into the pension freedoms era, understanding of optimal withdrawal strategies across multiple pension pots remains limited.