The number of people accessing regulated advice to purchase annuity and drawdown products fell in 2015 according to this year’s Future Book.
The research, carried out by the Pensions Policy Institute (PPI) and supported by Columbia Threadneedle Investments showed non advised drawdown sales grew from 9% to 15% between 2014 and 2015.
While independent advice was sought in 81% of drawdown sales in 2014 this had fallen to just 69% in 2015. However, more income drawdown customers chose to go down the restricted advice route with 16% of sales being generated this way as opposed to 10% in 2014.
On the annuity side non-advised annuity sales grew from 70% in 2014 to 74% in 2015. One fifth (20%) of annuity sales came through the independent advice route in 2015. This was down from 22% in 2014. Only 6% of annuity sales came through the restricted advice route in 2015. Again this was down from 7% in 2014.
The findings have prompted concern that without appropriate support and knowledge of potential risks then people risk making sub-optimal decisions.
This is exacerbated by the growth in savers looking to withdraw money from their pensions through cash lump sums since the Freedom and Choice reforms were introduced in April 2015.
The figures point to DC savers acting in a much riskier way according to PPI head of policy research, Daniela Silcock: "The second edition of the Future Book confirms that following the new Freedom and Choice reforms, people are accessing DC savings in riskier ways. More people are taking their DC pension savings through lump sum withdrawals than through annuities or drawdown, both of which offer some in-built protections. On top of this, fewer of those who are purchasing annuity and drawdown products are using independent advice; and interest in transferring pension savings from safer defined benefit pensions into defined contribution schemes has more than doubled."
She continued: "While for some people, with very small pots, this behaviour may not carry much risk, those who are very dependent on their DC savings could end up with a lower income in retirement if they make choices unsuited to their circumstances."
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