Thousands of people in drawdown are not adjusting their pension income levels to account for market volatility, leading to the fear of draining their retirement fund too quickly, warned the latest research from Zurich.

The study revealed that two in five people in drawdown are withdrawing the same amount from the pension regardless of how the stock market performs, with over 431,000 retirees using income drawdown to fund their retirement. This figure indicates that a potential 176,000 people could be impacted.

Twice as many retirees are deciding to keep their pension invested and draw a regular income rather than buying an annuity since the introduction of pension reforms, meaning that the value of their pension pot can rise or fall in line with the stock market. However, Zurich has found early evidence that consumers may not be aware of the need to consider adjusting their income in volatile markets, leaving them at risk of outliving their retirement savings.

Zurich research revealed that a third of people using drawdown have no hands-on investment experience, and two in five have not received either financial advice or guidance. A further 29 per cent said that they were confident in their investment decisions, despite having no previous experience of actively investing.

As a result of these findings, Zurich is urging government to publish safe withdrawal rates for retirees in drawdown, and make it mandatory for people to opt either in or out of guidance before being allowed access to their defined contribution pension.

Commenting, Zurich savings expert Alistair Wilson said: “Retirees in drawdown need to be flexible about how much money they take from their pension. Withdrawing more than the return of their portfolio, or when the value of the underlying investments has fallen, could lead to a savings shortfall in later life. When stock markets are volatile, retirees should be prepared to adjust their income to ensure they can sustain their pot throughout the course of their retirement. Setting the right level of income at different stages of retirement can be difficult, which is why speaking to a financial adviser or seeking guidance is important.

“With more people selecting drawdown over annuities, the Government should introduce a UK-relevant safe withdrawal rate to help consumers manage their retirement savings accordingly. The Government Actuary Department already publishes GAD rates for capped drawdown, which could be made relevant for consumers in flexi-access drawdown and published on the new Single Financial Guidance Body’s website. While this might not be a silver bullet, it would act as a rough guide for those not getting advice.”

Furthermore, the research found that one in ten UK adults not receiving advice turn to search engines to support them in navigating the complexities of drawdown, while 20 per cent look at newspapers and magazines.

Pension firms were the leading source of guidance for just a third of consumers, though 44 per cent of all those in drawdown confessed there is nothing that would prompt them to seek advice or guidance.

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