There was also bad news today for the government’s much-vaunted Pension Wise service which was set up by the Chancellor to ensure that people understood the implications of any decision to cash in their retirement savings.
A total of 178,990 pensions were accessed during the three-month period, and 68 percent of these, amounting to 120,969 pensions, were fully cashed out.
There was a concern in the City on Thursday over the way Britons were accessing their pensions, after fresh data from the Financial Conduct Authority was released. At around £155 a week, the state pension will be inadequate for many. A pot of £250,000 where savers take six per cent a year faces a fee difference of £10,000 between the best and worst value provider.
“However, market competition does not appear to be working, with fewer annuity purchasers shopping around”, McPhail said.
The data showed some 64pc of those taking an annuity did so through their existing provider.
“This may be an unintended effect of pension freedoms, but it is one that could have serious ramifications, particularly for those with smaller pension pots”.
“This means most retirees are missing out on getting the most from their retirement savings and we believe we are on the cusp of pensions mis-buying scandal”.
The majority of consumers accessing their pensions stayed with their existing pension provider to do so, with 58% of consumers going into drawdown staying with their existing provider, and 64% of consumers purchasing annuities staying with their existing provider.
‘While general guidance is available from Pension Wise, many people with unpaid debts and smaller pension pots will struggle to afford professional product-related advice’.
Gareth James, head of technical resources at AJ Bell, said: “Pensions are created to provide a long term income in retirement so these figures suggest the pension freedoms might be encouraging the wrong sort of behaviour”.
The figures will increase fears that the new pension freedoms introduced past year could leave millions sleepwalking into a financial disaster in retirement.
Across all products and full withdrawals, the larger the customers’ pension pots, the more likely they are to have used a regulated adviser.
Alan Higham, an independent pensions analyst, told the Daily Telegraph: ‘In the past people could access their money at 55 but were finding they could only take a quarter as a tax-free lump sum.
Those with a little more money put aside could also fall into a higher tax bracket if they take too much out at once.