A total of 287,181 households where the primary earner is aged between 55 and 64 will have taken cash from their pensions by the end of the year to help make ends meet, according to analysis by Outra.

The data science firm found that the number of older working households that plan to access their retirement savings had increased by 44 per cent compared to last year, when fewer than 200,000 of the same demographic opted to withdraw pension money by the end of 2022.

More than £2bn is expected to be withdrawn this year by those households that described themselves as struggling to make ends meet, according to Outra.

It warned that this increasing trend suggested that more people were using their retirement pot to cover the shortfall in living costs or dipping into savings to cover one-off costs, such as household emergencies.

Outra’s calculation was based on the number of households that were ‘struggling to make ends meet’, that are drawing down savings or have no savings at all, and have said they plan to withdraw from their pensions early.

While people can withdraw up to 25 per cent of their pension tax-free from age 55 while continuing to work, Outra noted that those choosing to do so were mostly withdrawing smaller amounts.

However, there were concerns that many Brits have insufficient funds to have a comfortable retirement.

Commenting on the findings, Outra chief data and technology officer, and former head of data at The Pensions Regulator, Peter Jackson, said: “People over the age of 55 can withdraw money from their workplace pension pot and the first 25 per cent withdrawn is tax free.

“So, this can seem like an attractive option for those struggling to make ends meet. However, the obvious impact of this will be less money left in their pension pot to cover retirement.

“Those approaching retirement should think hard about withdrawing money from their funds unless they are sure they have sufficient funds to see them through retirement.

“I would be deeply concerned if larger numbers were withdrawing money to cover everyday living costs or to pay for emergency one off household costs.”

---