But although proving popular the process, which allows over-55s at retirement to leave money invested in their pension whilst taking or ‘drawing down’ money from it at stages, is proving complex for many customers research by Zurich has discovered.
Its figures show that tens of thousands of drawdown customers are first-time investors, and the average pot is £153,000. Yet two in five are not getting financial advice about how to invest the remaining money.
Alistair Wilson, pensions expert at Zurich, said: “In the build-up to retirement, many savers rely on pension firms to make investment decisions on their behalf, meaning many have no hands-on investment experience when they take control of their pot.
“For retirees not getting advice or guidance, there is a danger they could end up picking the wrong investments or taking money out of their pot too quickly.
“This is putting a worrying number of people at risk of running out of money.”
The main dangers, warned Zurich, were that retirees took on too much risk, missed out on investment growth or made unsustainably high withdrawals.
Its research also discovered that one in ten adults who were not receiving advice relied on search engines to help them understand drawdown, while one in five used newspapers or magazines.
A huge 44% of those in drawdown said there was nothing which would prompt them to get advice.
Wilson added: “Understanding what can be done to encourage consumers to seek financial advice or guidance is crucial to helping retirees secure a decent, lifelong income.
“The Government should reconsider the case for introducing mandatory guidance for drawdown, requiring people not getting regulated financial advice to opt either in or out of receiving guidance before accessing their pension.”