
Those who do this may face higher-than-expected costs too, Legal & General (L&G), warns.
Under the ‘pension freedoms’ rules brought in 10 years ago, pensioners can withdraw all the money from their accounts as soon as they reach 55 (rising to 58 in 2028).
The first quarter of the pension pot can be accessed tax-free, but after that, you pay tax as you would with any other income. This means that those who take out a large amount of money at once from their pensions can be left with huge tax bills, as the withdrawals propel them into the higher- or additional-rate bands for tax.
A tenth of savers who hit 55 withdraw their entire pot, potentially leaving them open to tax bills, while two-thirds try to stay within the tax-free allowance by taking 25% or less.
One in five who withdrew a lump sum later regretted their choices and would have withdrawn less if they’d done it again, suggesting that the lack of advice and knowledge is an issue for many.

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“Withdrawing without seeking advice or guidance can lead to unexpected consequences, like paying more tax or even losing access to benefits,” said Katharine Photiou, managing director of workplace savings at L&G.
“For anyone considering taking a lump sum from their pension, there’s free support and guidance available,” she added.
Photiou also said the guidance available is “underutilised”. The firm has partnered with benefits advice service Turn2Us to help those with more modest pension savings not to leave themselves ineligible for state benefits when withdrawing cash.
“By offering digital tools and resources, we hope to help people to make more informed decisions as they approach retirement,” she added.
Why lump sums are accessed
While some savers access their pension because they need the cash, others could leave it invested and reap tax benefits later.
A third of people who accessed their pension did so to cover essential expenses but a larger proportion (46%) said they take the lump sum “because they could”.
The study follows research which found eight in 10 eligible pensioner homeowners miss out on benefits.
The Turn2Us calculators are one place to get tax advice when approaching retirement. Everyone is also entitled to a free PensionWise appointment from the Government when they hit 50, if they have a workplace or private pension that is ‘defined contribution’ rather than one based on a percentage of salary.
This can be held online, face-to-face or by phone and there are more details here.
For more help if you have a larger pot, you might want to consider speaking to an independent financial adviser.