'Little reason' to worry retirees taking advice are blowing their pension pots
There is "little reason" for concern that retirees are using new-found pension freedoms to blow their savings pots, according to an insurer's analysis of customers who have taken financial advice.
Royal London looked at data from a sample of more than 17,000 customers who were supported by financial advice to see how they were handling their drawdown pots in retirement.
More than a third were taking out between 3% and 6% of their pension pot per year, seen as a broadly sustainable amount.
The pension freedoms were introduced in 2015 to give over-55s a wider range of choices over how they use their pension pot. People can receive free guidance about this from the Government-backed Pension Wise service and they may also choose to take separate financial advice.
Royal London's analysis looked at customers whose adviser was using the firm's drawdown governance service, which provides advisers with quarterly assessments on how sustainably people are using their pension pots.
It found more than a quarter were withdrawing 4% to 6% per year, with 13.79% withdrawing 4% to 5%, and 13.31% taking 5% to 6%.
A further 9.71% were withdrawing between 3% and 4%.
At the other end of the spectrum, one in six (16.88%) were taking out over 10%.
These people tended to have much smaller pots, suggesting the money was not being used to support people throughout retirement and that there were other larger sources of income they were relying on, Royal London said.
Sir Steve Webb, a former pensions minister who is now director of policy at Royal London, previously said as minister that people should be trusted with their own pension pots, and that he was "relaxed" about the possibility of people spending their savings on a Lamborghini sports car.
Sir Steve said: "When managing a significant pension pot in retirement, taking financial advice helps individuals to make sure that their money lasts through their retirement.
"Our data shows that for those with larger pots, which are likely to form a major part of their retirement income, current withdrawal rates for those taking advice are typically in low single figures - there is no sign of 'Lamborghinis' in our data.
"Faster withdrawal rates tend to be associated with much smaller pots and this is likely to be for individuals who have other sources of income in retirement.
"This data suggests that for advised customers there is little reason for concern that pension freedoms are being used irresponsibly, but does show the potential advantages in getting more people take advice and guidance at retirement."