Nearly one in three pension savers using drawdown to fund their retirement have no investment experience and two in five (41%) of these drawdown beginners have received no financial advice or guidance, according to new research.

Research from Zurich published today suggests almost half a million (430,000) people are taking advantage of the new pension freedoms to draw down their retirement savings.

Despite this the highest proportion have never actively invested in the stock market. The research suggests at least 13% of all people in drawdown take no financial or investment advice.

Even though most are first-time investors, tens of thousands have “not sought regulated financial advice or guidance” even though they have an average drawdown pot of £153,000. 

Zurich says the study – believed to be the largest of its kind into consumer behaviour in drawdown – warns that a lack of advice and guidance could leave retirees at risk of running out of money in retirement.

Women in particular were more likely to be first-time investors, potentially putting them at greater financial risk (41% vs 29%).

According to Zurich, the ‘first-time investor gap’ is being driven by a lack of consumer understanding of drawdown, with almost half of novice investors who had not received advice saying they thought drawdown would be simple (47%).

A further third (29%) claimed they were confident in their investment decisions, despite having no previous experience of actively investing. 

Alistair Wilson, a pensions expert at Zurich, said: “As double the number of people choose drawdown over annuities, Britons clearly favour the freedom and flexibility, but the issue is that many appear to be underestimating its complexity.

“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 in retirement.”

Zurich wants the Government to 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.

The provider also wants to see the new Single Financial Guidance Body offer free ‘drawdown MOTs’ to help consumers not getting advice check they are on track in drawdown.

According to the research one in ten (10%) UK adults not getting advice rely on search engines to help them navigate the complexities of drawdown, while one in five (20%) look at newspapers and magazines.

Pension firms were the leading source of guidance for a third (35%) of consumers, though 44% of all those in drawdown confessed there is nothing that would prompt them to get advice or guidance.

The FCA recently said it was concerned that some consumers were not fully engaging with the guidance available from pension providers.

The study was based on a YouGov survey of a UK sample of 742 people who have moved into drawdown since the pension freedoms were introduced in April 2015.  The survey was carried out between 14 December 2017 and 24 January 2018.