The proportion of savers taking financial advice when accessing a pension for the first time using income drawdown has fallen below 50 per cent for the first time, the Financial Conduct Authority (FCA) has revealed.

According to the regulator’s Retirement Income Market Data, only 46 per cent of the 280,000 pension pots that entered income drawdown during 2023/24 benefited from professional financial advice.

Analysis of the data from Just Group showed that this represented a steep decline from the 66 per cent of drawdown customers taking advice five years earlier.

The use of advice has fallen across all methods of accessing pensions over the same time period, except for annuities where it has risen from 26 per cent to 32 per cent.

However, the overall number of individuals accessing their pensions with financial advice fell from 32.9 per cent in 2022/23 to 30.9 per cent in 2023/24.

Commenting on the findings, Just Group group communications director, Stephen Lowe, said that the trend towards more pensions being accessed without professional advice looked like a “massive red flag”.

“Retirement decisions are some of the trickiest financial decisions that people will ever face,” he continued.

“That’s particularly true for income drawdown where the saver is being asked to shoulder all the longevity and investment risk and is likely to find their income fluctuating over time.”

Lowe added that, with increasing numbers dependent on defined contribution pensions to supplement their state pensions, increasing take-up of advice is important.

“We are now in the 10th year of the pension ‘freedom and choice’ policy but these are still relatively early days in terms of understanding whether people are managing those withdrawals sustainably,” he stated.

“These figures reinforce the need for the industry to develop and promote advice models that can help people plan their retirement finances.

“The government needs to work harder to encourage many more people to take up their entitlement to the free, independent and impartial guidance from Pension Wise which is highly regarded by users but is still only used by one-in-10 accessing pensions.”

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