In 2020/21 61.3% of pension pots over £50,000 cashed in were withdrawn without financial advice, a rise from the 58.9% seen the previous year.

A total of 15,296 pots over £50,000 were fully withdrawn.

Of the 2,777 pension pots worth over £100,000 that were fully cashed in during 2020/21, six in 10 were taken without any advice, a rise from 56% the year before, according to an analysis of FCA data by NFU Mutual.

There were 1,646 people who cashed in a full pension pot over £100,000 without taking financial advice, putting themselves at risk of losing their annual £12,579 tax-free personal allowance.

Sean McCann, Chartered Financial Planner at NFU Mutual, said the data showed that thousands of people were risking paying 40%-45% income tax on their withdrawal while also losing valuable inheritance tax protection by not taking advice.

He said: “Those cashing in large pension funds not only risk a large income tax bill, they also lose the favourable tax treatment on any future growth as well as exposing the money to a potential inheritance tax charge.

“Some cash in their pension funds without a clear idea of what they plan to do with the money, often putting it into a bank account.

“Although it sounds counter-intuitive, for those that can afford to, pensions should be the last investment they access in retirement, because of the protection they offer from inheritance tax.

“It’s concerning that more people are fully cashing in large pension pots without taking advice first. If investors are concerned about market volatility, talking to their pension provider about lower risk funds may help them avoid an unnecessary tax bill.”

NFU Mutual analysed the FCA retirement income market data for 2020/21 which was published in December.