Savers who take some of their pension pot in cash could be losing out on retirement income, a regulator has warned.
A report by the Financial Conduct Authority (FCA) found that some drawdown customers could receive 37% more retirement income every year by investing in a mix of assets rather than cash.
Since the introduction of pension freedoms in April 2015, savers have been able to withdraw their pension in cash from the age of 55.
This proved a popular option, with around 1.5 million pots accessed by September 2017.
However, the FCA has warned that more guidance is needed to help consumers understand their options and make the most of their savings.
More than 60% of people who were not taking advice on a drawdown pension were not sure or only had a broad idea of where their money was invested, while 33% were holding funds entirely in cash.
The FCA has proposed that pension providers should send "wake-up" packs to their customers at the age of 50, which would include a clear summary and specific warnings about retirement risks.
Christopher Woolard, executive director of strategy and competition at the FCA, said:
"We know the choices introduced by the pension freedoms have been popular with many consumers.
"However, they're now required to make more complicated decisions than ever before. Many people need more support when making choices."
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