Since April 2015 those aged over 55 have been able to access their pension savings and draw on them in a greater variety of ways, including unrestricted income drawdown, and a growing number of people are opting to do this. HM Revenue & Customs (HMRC) reports that £1.86bn was paid out as flexible payments from pensions in the second quarter of this year, the largest quarterly amount paid out since pensions freedoms were introduced in April 2015.
But the Financial Conduct Authority (FCA) recently warned that people taking money out of their pensions could be making mistakes. The regulator is conducting a review into retirement outcomes that has so far found that 30 per cent of people opting for income drawdown are doing this without taking financial advice, compared with 5 per cent before the freedoms.
"Drawdown is complex and these consumers may need more support and protection," says the FCA. "Consumers who access their pots early without taking advice typically follow the 'path of least resistance', accepting drawdown from their current pension provider without shopping around."