The number of people taking regular pension withdrawals are at an unsustainable rate according to the just published UK regulator FCA's Retirement income market data for the year 2020/21.
Nearly half (43%) of regular withdrawals were taken out at an annual rate of 8% or more of the pot value, up from 42% in 2019/20.
Jon Greer, head of retirement policy at Quilter, said : "While the number of pensions being fully cashed out at the first time of asking is decreasing, it still makes up the vast majority of ways pension pots are being accessed following the pension freedoms.
As we have seen over the last two years, markets can crash at an instant, and withdrawing at such a rate will result in difficult choices having to be made in retirement."
"It might be that people are taking a pause for breath with their retirement funds as a result of the pandemic, but it is important that providers, the FCA and government departments make every effort to ensure people know their options when it comes to retirement.
"However, while people cashing out immediately is dropping, it is still the overwhelmingly primary way for people to access their retirement savings."
Greer continued: "Our own experience tallies with this data in that customers looking to access their pension money usually already have a set idea about the action they want to take, especially with smaller pension pots.
"This is where the recent stronger nudge to pension guidance could make significant headway, but consumer awareness of pensions needs to improve to help make it a success and ensure decisions are properly researched and not taken on a whim."
He added: "Perhaps most worryingly is the number of people taking regular withdrawals at an unsustainable rate. 43% of regular withdrawals were withdrawn at an annual rate of 8% or more of the pot value, up from 42% in 2019/20.
"This will quickly drain a pension pot and will not see it replenished fast enough, even in buoyant markets. As we have seen over the last two years, markets can crash at an instant, and withdrawing at such a rate will result in difficult choices having to be made in retirement.
"Pension freedoms have been a great success for people being able to take flexible approaches with their money, but more access to advice and guidance is needed to help people understand longevity and the risk of running out of money in retirement. On its own the state pension is not enough to live off comfortably so people need to make sure their private savings can last."
Greer further said: "Awareness also needs to be raised on what people then do with the cash once they get it. Investment pathways will have helped with this but it is too early to assess the impact these have had on people's decision making.
"Far too many people take their pension pot and stick it in cash. With inflation spiking and prices likely to be reset at a higher level, those sat in cash will quickly see their money eaten away. This invisible threat could result in the difference between a comfortable and a difficult retirement. Guidance, therefore, is a good first step but every effort needs to be made to get people to seek financial advice on what to do with their hard-earned retirement savings."