"Understandably, most retirees are loathed to give up to half of their hard-earned retirement savings over to the taxman for the privilege of drawing down their own money earlier."
The government plans to launch a new single financial guidance body which is expected to take on and widen the services offered by The Pensions Advisory Service, Pension Wise and the Money Advice Service.
Green argues that the service must address the downsides or face a “potential crisis triggered by the pension freedoms".
He added: “Many are initially attracted to the idea, but when confronted with the reality, they, quite rightly, ditch the notion of cashing in their pension in favour of a more traditional drawdown method.
“This is because after the first 25 per cent which is tax-free, the rest would be subject to income tax. Understandably, most retirees are loathed to give up to half of their hard-earned retirement savings over to the taxman for the privilege of drawing down their own money earlier.
Green says that this "must be made clearer" to help customers avoid the risk of "compromising retirement ambitions, making hasty decisions, and facing substantial tax charges".
Green added that he has "deep concerns" about the government launching another financial guidance service, arguing that the government’s delivery of these services "has, to-date, been less than satisfactory".
He continued: "The number of savers who have taken up Pension Wise’s offer of 45 minutes of free guidance has been remarkably low. And whilst there remain concerns about the delivery and content, some form of guidance is arguably better than nothing when making important, long-term financial decisions.
“The government must make the distinction clearer between guidance and advice. Guidance might be attractive because it is free, but it must not be mistaken for professional, independent, regulated advice.
“Guidance can present all the options available, but advice can help the consumer chose the most appropriate one for them. Guidance can give the consumer the topics, themes and questions - for example about risk appetite - to then ask an adviser. Guidance is generic, whereas advice is tailored to the individual. As such, guidance is not a substitute for advice."
