Savers are being urged to ‘stop and think’ before accessing their retirement pot during ‘peak withdrawals season’ in April, June and July.
Flexible pension withdrawals traditionally spike at the start of the tax year, as savers take advantage of a fresh set of tax allowances.
The only exception to this was in 2020, when uncertainty caused by the pandemic saw savers pause or reduce withdrawals.
Tom Selby, head of retirement policy at AJ Bell, comments: “The start of the tax year is traditionally peak pension withdrawal season, with hundreds of thousands of savers dipping into their retirement pot – many for the very first time.
“This time last year saw a particularly sharp spike in withdrawals, with a record £3.6 billion of taxable payments withdrawn from pensions flexibly by over 500,000 people during the quarter, at an average of £7,000 per withdrawal.
“This represented a staggering 23% increase compared to the same quarter in 2021, with surging inflation undoubtedly a significant factor as many savers were forced to turn to their pension pots to make ends meet.
“With inflation remaining persistently high and millions of households facing eye-watering increases in housing costs, we are likely to see another surge in pensions access over the next three months.
“Anyone considering accessing their pension for the first time or hiking withdrawals to cope with rising living costs should stop and think before making a rash decision. Taking money out of your retirement pot early or withdrawing too much, too soon could have disastrous consequences over the long-term.
“What’s more, pensions benefit from generous tax treatment on death, meaning it often makes sense for your retirement to be the last asset you touch.”