The government’s Pension Decumulation & Decision-making report found that while most people understood they could withdraw 25% of their pension tax-free, knowledge of more complex options such as income drawdown and annuities was limited.

Many also struggled to understand investment risk, charges and how long their retirement savings would need to last.

The research, based on interviews with 55 people aged between 53 and 67, found confidence in retirement planning was closely linked to pension knowledge. Those with the lowest confidence often avoided engaging with their pension altogether because they found the subject too complex, while others delayed making more complicated decisions despite understanding the basics.

The report said: “Decisions were shaped by income security, lifestyle expectations, work demands, health, family responsibilities and long-term outlook. Many hoped to maintain a comfortable lifestyle and support family members, while worrying about making mistakes, running out of money and uncertainty about the future. Respondents expressed a need for clearer and simpler information that was more personalised.”

The DWP also found awareness of the government’s free Pension Wise guidance service was relatively low among those who had not yet planned to access their pension. Those who had used the service generally viewed it positively, saying it helped explain their options and improved their confidence, although it rarely altered the decisions they eventually made, The FT reports.

Paid financial advice, meanwhile, was often seen as too expensive, with some respondents also questioning advisers’ independence.

The report added: “Respondents wanted plain-English explanations and tailored guidance as well as earlier financial education.”

Only a small proportion of those interviewed reported feeling highly confident about retirement decisions. These respondents were typically people who had received professional financial advice, worked in a relevant field or spent significant time researching their pension options.

Although the DWP said the qualitative study was not statistically representative of the wider population, it provides insight into the challenges many defined contribution pension savers face as they prepare for retirement.