One in ten plan to cash in entire pension savings

Its study found that 20% will also risk avoidable tax bills by taking out more than the tax-free 25% limit on withdrawals.

The main reason given by those taking all their fund in one go was to invest in other areas such as property, a saving accounts or an investment fund (71%). Around two thirds (66%) of people are also planning on retiring early.

Since the launch of pension freedom reforms in April 2015, more than 1.1 million people aged 55-plus have withdrawn around £15.7 billion in flexible payments.

Government estimates show around £2.6 billion was paid in tax by people taking advantage of pension freedoms in 2015/16 and 2016/17 tax years with another £1.1 billion raised in the 2017/18 tax year.

The most popular use of the cash is for holidays with 34% planning to spend the money on trips. Around (25%) will spend the money on home improvements while one in five (20%) will gift the money to their children or grandchildren.

Stan Russell, retirement income expert at Prudential, commented: “Pensions freedoms allows savers to have the flexibility on how and when to spend their money without being penalised by the tax system but it is worrying that so many will withdraw more than the tax-free lump sum limit.

“The risk is even greater for those who are taking all their pension fund in cash. They not only face paying more in tax than they have to but also put their long-term retirement income security at risk."