Financial regulators are mulling an "intervention" into pension drawdowns after admitting the retirement income market has "changed substantially" since George Osborne introduced his landmark pension freedoms.
In July, the Financial Conduct Authority (FCA) launched the first study into the retirement income market since pension rules were relaxed in April 2015.
In its interim report released today the FCA said drawing down from pension pots early had become "the new norm" and said 53 per cent of pension pots accessed early had been withdrawn fully.
However, more than half of these people are not moving their cash to other savings or investment products, partly "due to a lack of public trust in pensions", the FCA said.
“Since the introduction of the pension freedoms, the retirement income market has changed substantially," said Christopher Woolard, FCA executive director of strategy and competition .
"This study looks at what has happened during this time, and gives us an early view of areas to keep a close eye on.
"We have identified areas where early intervention may be needed either now or further down the track to put the market on the best footing for the future. Ensuring this market works well will require cooperation across government, regulators, the industry and consumer bodies."
Meanwhile, Hargreaves Lansdown's head of policy, Tom McPhail, was less than impressed:
This report looks like a regulatory cry for help; the FCA seems to be trying to put the pension freedom genie back in the bottle.
The FCA raised concerns people were accessing retirement pots early without taking advice. It also expressed worries over the increasing lack of competition in the annuity market as many providers withdraw from it.
Gareth Shaw, a money expert at consumer website Which said working out how to generate retirement income from pension savings "is one of the most daunting and complex decisions people have to make".
It is worrying that the FCA has highlighted that many people are not shopping around or taking much needed advice.
The annuity market failed pensioners in the past. The FCA must now use this review to ensure that similar mistakes are not made with income drawdown products.