The number of pension pots emptied at the first time of access in 2019/20 rose by 5 per cent compared to the previous year, climbing to 375,500, according to data from the Financial Conduct Authority (FCA).

The regulator’s retirement income market data for 2019/20 showed that 9 out of 10 of these were pots worth less than £30,000, with 88 per cent of newly accessed pots with a value of less than £10,000 being fully withdrawn.

More than two-fifths (42 per cent) of regular withdrawals were withdrawn at an annual rate of 8 per cent or more of the pot value, up from 40 per cent the year before.

Just Group communications director, Stephen Lowe, commented: “These are not people whose funds are so big they don’t need to worry. In fact, the larger the fund, the more cautious the withdrawal rate. More than half (51 per cent) of those with £30,000-£100,000 pension funds are taking more than 8 per cent compared to 28 per cent of those with funds valued at more than £100k.”

AJ Bell senior analyst, Tom Selby, added: “Assuming an annual investment growth rate of 4 per cent and income rising in line with inflation at 2 per cent, someone withdrawing 8 per cent a year risks exhausting their pot within 15 years. If they have no other assets they will be forced to rely on the state pension to fund their retirement, which is worth around £9,000 a year.

“Anyone withdrawing at this rate – or indeed any rate significantly higher than 4 per cent - needs to consider the long-term implications of their spending decisions and the impact they might on their future lifestyle.”

The number of pensions accessed for the first time in order to purchase an annuity declined by 6 per cent to around 69,500.

The total number of pensions accessed for the first time increased by 3 per cent in the year, rising from 652,000 to 674,000.

Lowe said: “Today’s figures show more pension funds are being accessed, a higher proportion are being fully encashed and those who are taking income are taking higher amounts. Of those pots going into the relative complexity of drawdown, 27 per cent were moved without advice or guidance which is higher than the 25 per cent previously.

“We are more than five years into the pension ‘freedom and choice’ experiment and while giving people aged 55+ easy access to cash is undoubtedly popular, that doesn’t mean they are going to have more financially secure retirements.”

Canada Life technical director, Andrew Tully, commented: “The pension freedoms continue to be hugely popular but with this freedom and choice comes huge personal responsibility. Five years in we continue to see a drift away from financial advice as people choose to DIY drawdown.

“While others choose to strip their pensions at what most professionals would argue is an unsustainable rate of income. This may be OK if it is a deliberate strategy to deplete pension pots early, or over a set period, but my concern is we could be storing up trouble for the future if this data continues to tell a similar story in the years to come.”

The number of defined benefit (DB) to defined contribution transfers received by pension providers were down by 28 per cent on the previous year, coming in at 40,600 following an FCA crackdown.

Aegon pensions director, Steven Cameron, said: “With the latest FCA DB transfer advice rules coming into effect on 1st October, there is a real risk we’ll see a further sharp fall in the number of advisers prepared to advise in this important market, risking demand for advice exceeding supply.”

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