A record 673,831 DC pensions were accessed for the first time in 2019/20, the highest number in the five years since the pension freedom reforms.
The number of DC pension pots accessed without guidance or advice also rose by 8%. The overall proportion of pots accessed without guidance or advice hit 50%, up from 48% in the previous year.
The UK Government and the FCA are looking to encourage more people to access the free Pension Wise guidance service. The number of people accessing guidance appointments offered by Pension Wise rose 23% in 2019/20.
Pension Wise is a free service launched five years ago, designed to help people understand their options when accessing their pension. It us run by the government-backed Money and Pensions Service (MaPS).
Just Group has urged the FCA to switch to a system where guidance sessions are booked automatically for pension savers.
Stephen Lowe, group communications director at Just Group, said: “Dipping into pension money is becoming more popular but most people are shunning the professional support that is available to help them make good choices, even when that support is free.
“An entitlement to free, impartial and independent guidance was a key part of the 2015 reforms to help pension savers navigate the more complex environment, but usage remains far too low.
“Guidance enhances people’s understanding of the options available to them and develops confidence to make better choices and the insight to avoid scams.
“Last year overall Pension Wise guidance usage slipped from 15% to 14% for all DC pensions being accessed but it was less than one in 10 (9%) for pensions where some cash was taken and the rest of the pension money put into a drawdown plan.
“Around six in 10 drawdown solutions are sold by providers to their existing customers and using guidance would draw their attention to the need to shop around to ensure they are making good choices and receiving value for money.
“At the moment guidance is offered at the point that the carrot of cash is hanging right in front of people. It would be better to deliver the guidance earlier so people have a chance to think about the longer-term consequences.
“Our own research found only one in 25 people aged 45-54 would opt out of a guidance session pre-booked for them. This approach would be especially helpful for groups with lower financial capability and less engagement in pension decisions who are currently at greater risk of making poorer choices.”