Almost 70 per cent of people accessing their pensions for the first time did so without seeking advice in 2022/23.
The number of people accessing their pension for the first time rose by 5 per cent as the impact of the cost-of-living crisis continued to be felt.
The total number rose to 739,535, compared with 705,666 in 2021/22, the Financial Conduct Authority's retirement income market data showed.
Of this number, just 32.9 per cent had taken regulated advice before accessing their plans, slightly down from 33.4 per cent the previous year.
Despite the rise in people accessing their pots for the first time, the overall amount withdrawn decreased by 5 per cent to £43,199, down from £45,638.
Kirsty Anderson, retirement specialist at Quilter, said this suggested people were dipping into their retirement funds to keep up with the rising costs of energy and food.
Anderson added: “It is worrying that so many people who do not seek advice still appear to be opting out and going ahead without support. Taking guidance at this stage in life is a long way from becoming normalised.
“Something needs to change to ensure more people get help in making what is ultimately one of the biggest financial decisions they will ever make.
“Particularly when decisions made in the early years of accessing a pension can have long term implications on pension growth and income sustainability.”
‘Drawdown advice can be complex’
Andrew Tully, technical services director at Nucleus Financial echoed the view that the cost-of-living crisis will be felt for years to come and said it was no surprise more are making withdrawals from their pensions than before.
He added: “Given the range of retirement options available, it is important consumers get good advice at the point they first access their pension savings and on an ongoing basis to work out the best options for their individual circumstances.
“Drawdown advice can be complex, covering areas such as sustainability over a long time period; the ideal investment options; and tax advice, including how to pass on wealth efficiently to family.
“Advisers need to be clearly documenting their advice as that is one of the areas the FCA focused on during its retirement income advice review.”
The FCA’s data also showed that of the plans accessed for the first time, more than half were cashed out in full.
This is most prevalent in pension pots of lower value.
In the final quarter of 2023, almost 205,000 of the 367,592 pensions accessed for the first time were encashments.
Steve Webb, LCP partner, said: “These figures highlight the fact that hundreds of thousands of people reach retirement each year with very small pension pots.
“These pots would generate very little regular income if spread out over the decades of retirement.
“Instead, the majority of people still judge that the best thing to do is to cash out their pension and enjoy some additional cash at the start of their retirement.
