Half of over-55s (51%) admit they know little about the pension freedoms five years on from the introduction of the new rules, while thos with most detailed knowledge receive financial advice, research from Standard Life has revealed.
A further one in 10 Britons aged over 55 say they know nothing about the changes, while just over a third (34%) said they remember changes taking place.
The research found that women were less likely to know about the rules, with 58% stating they knew little about what they entailed compared to 43% of men.
However, individuals who receive financial advice had a better understanding of the pension freedoms, according to the investment group. Almost two thirds (62%) of those who currently receive financial advice say they have detailed knowledge of pension freedoms, compared to a third (33%) of over-55s that have never received financial advice.
Alastair Black, head of platform proposition, Standard Life, warned that the lack of knowledge and understanding of the rules means people risk making decisions that are not best for them.
Black said: “It is encouraging to see those that receive financial advice are more familiar with the rules. It underlines the value of advice especially as Britons have more choice than ever before as they head into retirement. And our research shows engaging an adviser is still the best way for people to navigate their options.”
Standard Life’s research also found that over a third (35%) of Britons aged between 55 and 64 have already accessed their pension pot, prior to receiving their state pension. The same proportion of people aged between 45 and 54 said they will likely take a tax-free lump sum from their pension pot at some point, with 30% of this group planning to do so as soon as they hit 55.
Meanwhile, 15% of adults aged between 45 and 54 say they expect to take a taxable lump sum in retirement, with 24% of those planning to do so as they reach 55.
Yet, only just over a quarter (28%) of people aged 45 and over who are yet to retire are looking to receive financial advice as they approach retirement.
Black added: “In the current climate, we know many advisers are hearing from clients keen to dip into their pension savings as soon as they can. Pension freedom rules mean those aged 55 and over are able to do this, but they may not realise that taking from their pension now risks locking in losses of the current stockmarket falls.
“Those with a financial adviser are more likely to understand the pitfalls of taking a tax-free lump sum from their pension pot, which is why our research showing so many people nearing retirement are not planning to take any form of advice is concerning.”
