The regulator’s new retirement income market data published today showed that around 56% of all pension pots accessed were cashed out in full.

That was compared to just over a third (36%) that was moved into some form of drawdown and just 8% used to buy an annuity.

Steve Webb, LCP partner and former Pensions Minister, said the figures were hardly surprising considering that hundreds of thousands of people reach retirement each year with very small pension pots.

He said: “These pots would generate very little regular income if spread out over the decades of retirement. Instead, the majority of people still judge that the best thing to do is to cash out their pension and enjoy some additional cash at the start of their retirement.”

He said that with fewer retirees having DB pensions to fall back on, it’s time to, “boost pension pots to a size where it makes sense to keep them rather than cash them in.”

Andrew Tully, technical services director at Nucleus Financial, said the high number of people accessing their pension pots reflected the cost-of-living crisis that has hit the UK in recent years.

He said: “The effects of the cost-of-living crisis will unfortunately be felt for years to come, so it’s no surprise to see greater numbers of people making withdrawals from pensions than in the previous tax year.”

He warned that consumers must get good advice at the point they first access their pensions savings.

He said: “As part of the detail published alongside the headline numbers, the data showed that less than half of people (47%) seek advice or guidance (Pensions Wise) before buying an annuity, and that is trending down, compared with the same period two years previously, where 58% of people sought advice or guidance.”

Nick Flynn, retirement income director, Canada Life, said fewer people seeking advice was a problem.

He said: “It is really disappointing to see inertia continue to play a big role in retirement income decisions, with far too many people not exercising their right to shop around for not only the best rate, but also the right shape annuity for their individual circumstances.

He said that improving the availability of guidance and encouraging more people to seek the help of an annuity broker or independent financial adviser, rather than simply accepting the status-quo from their pension provider, will provide better lifetime consumer outcomes.