Defined contribution (DC) pension savers have been urged to take advantage of financial advice as a record number of people are set to hit pension freedoms age in 2020, according to Aegon.

The firm found that a record number of people (941,000) people are expected to turn 55 in 2020, meaning there are more people in the UK of that age than any other.

The following six years are also expected to see a historically record number of people reaching pension freedoms age, with population estimates for those approaching 55 “consistently over 900,000”.

Pension freedoms, which were introduced in 2015 and celebrated their fifth anniversary in April of this year, gave individuals with DC pensions the flexibility to start accessing their retirement income from the age of 55.

However, Aegon has now warned that the ongoing market volatility caused by the current pandemic is likely to “raise new challenges” for those looking to take advantage of pension freedoms.

Aegon pensions director, Steven Cameron, explained: “The coronavirus is affecting all aspects of our lives, including wealth as well as health, employment opportunities and attitudes towards retirement.

“The deadly impact of the virus on many thousands may also change people’s attitudes towards choosing between the financial guarantee for life of an annuity and the flexibility of income drawdown under the pension freedoms.

He emphasised that pension freedoms have proven popular because of "the enormous flexibility" they offer savers, adding however, that there are also risks of remaining invested in the stock market, which have been bought into "stark relief" during the course of the pandemic.

"In the current climate more than ever," he continued, "we strongly encourage individuals, whether considering or currently drawing an income, to seek financial advice before making important financial decisions that could have a lifelong impact.”

Barnett Waddingham have echoed these concerns, warning that many retirees are “clearly flying blind”.

Barnett Waddingham head of workplace wealth, Mark Futcher, highlighted that around half of pension pots are being accessed without regulated advice or guidance being taken by the plan holder, and as such, "people are putting their futures at risk".

He continued: “Making the wrong decision at retirement can easily waste ten years' worth of contributions – which is even more damaging in the current economic climate.

“Companies pay a lot into employees' pensions over the years so it’s puzzling why they would want to see them waste it on a stab in the dark at retirement time; it is their responsibility to guide their employees, communicating and clarifying the options available to members, especially at the most crucial stages.

“Providing access to impartial, professional advice from a qualified advisor is one way of ensuring that employees are making the decision which is most appropriate for their short, medium, and long-term goals.”

Share Story: