While smaller pension sizes see the highest proportion of high withdrawal rates, over 15% of pots of £250,000 or larger and more than a third (36%) of pots between £100,000 and £249,000 were still withdrawn at 8% or over through the latest financial year.

Looking at the data by age, half (50%) of those aged 55-64 are making regular withdrawals at an annual rate of 8% or higher.

The data also shows that 479,485 pensions were fully withdrawn at the first time of access through the year although the majority of these were pots smaller than £10,000.

“The headline figure of around a third of a million pensions being withdrawn at rates of 8% or higher will inevitably raise questions about long-term sustainability. For some retirees, particularly those relying heavily on defined contribution savings to fund retirement, withdrawal rates at this level may increase the risk of exhausting their pension pot earlier than expected.

“However, this data only tells us how much is being withdrawn, not whether those withdrawals are appropriate. Some retirees will have other sources of income or wealth, while others may be deliberately drawing down pension savings over a shorter period rather than planning for a retirement lasting several decades.

“Pensions are there to support living standards in retirement, not simply to be preserved indefinitely. Indeed, with future inheritance tax changes likely to increase focus on spending pension wealth during retirement, higher withdrawal rates will not always be a sign that savers are making poor decisions.

“What this data does highlight is the growing need for better support at retirement. An 8% withdrawal rate may be entirely appropriate for one saver and wholly unsuitable for another, depending not only on their personal circumstances and objectives, but also on their wider household finances, including a partner’s income, pension arrangements and other sources of wealth.”

“That is why the development of guided retirement solutions could prove so important over the coming years. Pension freedoms gave savers flexibility over how they access their money, but the industry is still grappling with how best to help people turn pension pots into sustainable retirement incomes. The direction of travel is promising, but designing solutions that can deliver good outcomes across a highly diverse retiree population remains a significant challenge.”

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