Savers withdrew £6.5bn using the pension freedoms in 2017 according to data from HM Revenue and Customs.
This is nearly £1bn more compared to 2016 when £5.7bn was taken out of pension savings.
On a quarterly basis, nearly 200,000 people took payments from their pension totalling £1.5bn in the fourth quarter of 2017 which is slightly lower than £1.59bn taken out during the third quarter of 2017.
The total amount of money withdrawn since the pension freedoms started in April 2015 stands at £15.7bn.
The data from HMRC covers “flexible payments” from pensions, which include full or partial withdrawals, flexible drawdown and buying a flexible annuity.
Commenting on today’s figures Just Group group communications director Stephen Lowe says pension freedoms are well-established but the sustainability of withdrawal rates is unknown.
He says: “Savers are enjoying the flexibility of being able to exercise greater choice about how to use their pension savings. More than £6.5bn was withdrawn last year, up 15 per cent from 2016, and there’s a school of thought that says that much money can’t be wrong.”
However, he adds: “But the truth is we don’t know – the industry still has little idea whether these savings are being used sustainably.”
Hargreaves Lansdown senior pensions analyst Nathan Long suggests the fall in the amount withdrawn in the fourth quarter could be evidence of prudence among retirees.
He says: “Rather than use pensions to splurge on an extravagant Christmas, retirees have operated restraint when managing their pensions showing the new rules are bedding in nicely and the amount being withdrawn is stabilising.
“The number of payments made has increased, but this is simply a reflection of more and more people using drawdown for their income in retirement.”
He adds: “The fact the rate of growth is slowing actually shows that the dash for cash is abating and retirees are facing up to managing their pension pot to provide for their life after work.”