Savers are set to raid £6bn from their pension pots in the four months following the introduction of new freedoms, Hymans Robertson predicts.
The actuarial consultancy expects the normal amount of “retiring” money – between £10bn to £15bn – to be run down more quickly than previously as drawdown products and cash withdrawals increase in popularity from April.
The firm assumes 5 per cent of the £100bn held in the pension pots of over-55s will be withdrawn this year, as well as an increased appetite for defined benefit members to move their funds to defined contribution arrangements, all adding to the total withdrawn.
Hymans has previously predicted one in three people with DB pensions will choose to transfer to DC schemes to take advantage of the new flexibilities.
Hymans partner Chris Noon says the industry needs to focus on people who access their funds without the help of an adviser and suggests a traffic light system to alert pensioners to the chances of running out of money too soon.
He says: “To meet the needs of more engaged retirees, we expect to see tools emerge that will help manage their drawdown by, for example, adjusting investment and income strategies to achieve a sustainable approach.
“Overall, we know that the vast majority of retirees don’t want to eat through their pension funds too quickly. Through the publication of calorie information, the food industry is helping people understand the longer-term implications of over-eating. If the pensions industry doesn’t do the equivalent, we will find that many who have saved conscientiously for decades with us will then overspend out of ignorance. It would be irresponsible of us if we allowed this to happen.”
Earlier today, Age UK warned members with small pension pots could run out of cash a decade early.