'Pension savers are losing £1.7bn, because they act without financial advice'

In the financial year April to April 2021/22, just over 395,000 pensions were accessed for the first time, and fully taken out via drawdown.
Michael Kennedy

Financing your retirement is the biggest financial plan of your life. Bigger than your mortgage, bigger than your car loan, bigger than your wedding.

Forget Amazon, forget Etsy, focus on the important stuff. Your dog, your cat, your children, and, if there’s anything left after that, your partner. In that order, please. That means your pension.

Pension savers are losing £1.7 billion, because they act without financial advice when accessing their pension savings.

These are the findings of a new report 'Converting pension pots into retirement incomes: Are current roads delivering member value?' by HSBC Tomorrow Master Trust.

Since 2015 we have had new pension freedoms, including the freedom to take out, or ‘draw down’, money from our pension savings, and either spend it, re-invest it, or perhaps purchase an annuity with it – an annuity being the classic financial product that turns your savings into a regular income for you.

The problem is that, in terms of providing information to savers as they come to retire, pension scheme managers – the ‘trustees’ – are required only to provide ‘wakeup packs’ giving broad details of the options.

There is no requirement for them to make the pension freedoms directly available from the scheme.

As a result, savers are forced to take their funds elsewhere, to other providers. When they are left to their own devices, without expert advice, mayhem often ensues.

Some draw out more than their 25 per cent tax-free threshold, thus incurring large tax bills, or incur hefty transfer fees that come with moving assets from one provider to another.

Savers may also unwittingly move to a provider with high annual management fees. Bottom line, as summed up by the report’s author

The report's author, Professor Andrew Clare said: “As members transition into retirement, current pathways can erode the real value of pension savings that took a lifetime to accumulate.”

Now my favourite bit. The numbers.

In the financial year April to April 2021/22, just over 395,000 pensions were accessed for the first time, and fully taken out via drawdown.

Of those, 65 per cent were fully withdrawn without financial advice, many incurring huge and avoidable tax bills. Nightmare.

The report also notes that the situation could get even worse in future, because the pensions landscape is always in a state of flux, and new regulations will mean new saver needs over time.

Why lose so much of your pension savings when you could have saved it by taking financial advice?

I’ve noticed from TV ads that, these days, phones are being marketed as fancy cameras you can talk into.

Well, if you have a pension, save yourself the cost of your next super phone. Talk into it. Number below.

:: Michael Kennedy is an independent financial adviser and pensions specialist and can be contacted on 028 7188 6005. Further information on Facebook at Kennedy Independent Financial Advice or at