Thousands of retirement savers shifting their pensions into drawdown are shunning professional financial advice.
Financial experts argue that they risk draining their pension funds too soon because they are taking more than they can afford from their savings.
Number crunchers at financial firm Zurich claim more than 435,000 people have moved their pensions into drawdown, but only one in three know how much income the pot generates each year.
A third compared the drawdown amount they could afford to withdraw against the monthly living costs and a similar number calculated how long they would take to exhaust their fund.
Only one in five bothered to budget for leisure, such as holidays and meals out.
Blind luck is most popular strategy
Even fewer retirement savers had the savvy to draft a drawdown strategy, with only 16% considering how to invest their money and just 17% deciding if they should sell shares or units to fund withdrawals or if they should only take interest and dividends while leaving their investments untouched.
Zurich’s Alistair Wilson said, “Many retirees in drawdown are relying on blind luck to make their savings last throughout retirement. But by taking simple steps to work out how much they can afford to take from their pot, savers can avoid withdrawing too much, too soon.
“Setting a sustainable level of income in drawdown can be something best done by speaking with a financial adviser, or getting free guidance from Pension Wise.”
Failing to plan financially for retirement also impacts family and loved ones destined to inherit wealth or assets.
Passing on wealth efficiently
Only one in five (19%) retirees in drawdown have ensured that their partner has the financial knowledge and understanding to continue managing their investments and just 15% of retirees have put a financial plan into place if they or their partner were to pass away.
“Many people don’t like talking, or even thinking, about themselves or a loved one passing away,” said Wilson.
“However, to pass wealth efficiently and not leave loved ones swamped by complex financial decisions it’s important that those set to receive inheritance are engaged with financial conversations from the outset.”
He suggests retirement savers should research the best way to withdraw their income before retiring – and that they should have a budget to control spending.