Data gathered by the Financial Conduct Authority (FCA) show almost half (48%) of all pension plans are bring accessed without regulated advice or guidance being sought by the plan holder.
The FCA report, issued today, shows that just 37% of plans were accessed by plan holders who took regulated advice, while 5% by plan holders who did not take advice but received Pension Wise guidance.
There is also concern within the industry at the rate with which pension pots are fully withdrawn in the era of pension freedoms. Just over 645,000 pension plans were accessed to buy an annuity, move into drawdown or take a first cash withdrawal in 2018-19.
It is deeply concerning how many people are pulling all their cash from their pension pots without advice or guidance and the potentially catastrophic poor outcome for thousands of consumers must be acknowledged as a failing of government."
Of the latter, over 350,000 pension pots were fully withdrawn at the first time of access; 90% of which were less than £30,000 in value. 4 in 10 of all the pension pots accessed had a value of less than £10,000. And 40% of regular withdrawals were withdrawn at an annual rate of 8% or more of the pot value.
Pension providers covered by the FCA's data return received 57,000 defined benefit (DB) to defined contribution (DC) pension transfers.
Jon Greer, Quilter head of retirement policy, said the FCA data "makes for terrifying reading."
Greer added: "Failing to get advice could have disastrous long term consequences unless you have a very good understanding of the tax landscape and are able to objectively plan a sustainable retirement strategy, which very few people can."
Keith Richards, CEO of the Personal Finance Society, said: "It is deeply concerning how many people are pulling all their cash from their pension pots without advice or guidance and the potentially catastrophic poor outcome for thousands of consumers must be acknowledged as a failing of government and regulator to deliver clear guidance for the public.
"The FCA is right to be concerned about non-advised drawdown sales because of the risks of managing drawdown, but what was expected when the public message was ‘it is your money, you are free to do what you what without restriction'?
Richards went on: "The FCA's data showed that the odds of someone taking advice generally increases with the size of the pension pot. Consumers with small pots shouldn't be assumed to be people without other assets or complexities, who could have benefitted from professional advice.
Richards urged the government and the FCA do more to "make sure providers are signposting guidance services and advice and explaining the potential ramifications if you don't seek assistance."