Savers have been warned they could face trouble in the future as the regulator found 42 per cent were taking more than 8 per cent from their pensions each year.

Latest data on the retirement income market from the Financial Conduct Authority found savers with smaller pension pots, typically worth between £10,000 and £100,000, were particularly susceptible to high withdrawal rates.

Those with pots worth more than £250,000 tended to be more cautious and take smaller withdrawals.

Steven Cameron, pensions director at Aegon, warned this level of withdrawal from smaller pots was not feasible in the long term.

He said: “While those with tiny pots who are fully encashing them may not need advice, the worryingly high proportion taking large withdrawals of above 8 per cent really do need help in understanding this level of income is not sustainable for life.”

The data showed that of those using an 8 per cent withdrawal rate, more than two thirds (67 per cent) had pots worth between £10,000 and £99,000.

This compared with 24 per cent of those with funds valued at more than £100,000. Typically, savers with larger pensions accessed their pots at a withdrawal rate of between 2 and 3.99 per cent.

Stephen Lowe,  group communications director at Just, said: “Of those who are using their pension funds for income, 42 per cent were taking more than 8 per cent a year from the fund which is an increase on the 40 per cent recorded in the previous period.

“These are not people whose funds are so big they don’t need to worry. In fact, the larger the fund, the more cautious the withdrawal rate.”

Concerns were also raised by the industry after the FCA’s data revealed the number of people taking regulated advice when entering drawdown had fallen by almost 10 per cent in the half year to March.

Advised drawdown sales had fallen from 66,400 in April to September 2019 to 59,784 in the half year to March 2020.

About 63 per cent of pension pots had entered drawdown with regulated advice being taken by the holder, while 10 per cent of pots entered drawdown by people who received Pension Wise guidance.

This compared with 27 per cent of plans entering drawdown with no advice or guidance.