Retirees withdrew about £2.6bn in flexible payments from their pensions.

There was a 6% increase in the number of individuals withdrawing year-on-year although the data shows a 4% fall in the average value of withdrawals to £6,800. 

The number of withdrawals is 6% higher than in the previous quarter, suggesting more frequent withdrawals but with lower sums withdrawn each time.

In total, £45bn has been flexibly withdrawn from pensions since the Pensions Freedoms were introduced in 2015.

The number of pension savers taking income via UFPLS (uncrystallised funds pension lump sum) saw a 96% jump in Q1 2021, compared to Q4 2020.

Commentators said the data suggested withdrawals were returning to a more normal pattern after last year's turmoil.

Andrew Tully, technical director, Canada Life, said: “We’ve hit a record high for the number of people choosing to withdraw from their pension this past quarter but looking back over the pandemic year the overall value of withdrawals is down from the peak. 

“This is likely down to the inability to spend on big ticket items like holidays, but people have been bolstering their finances using their pensions as bank accounts. The issue here is the unintended consequences of the Money Purchase Annual Allowance that could come back to bite them, if they continue to contribute to their pension.”

Nathan Long, senior analyst at Hargreaves Lansdown, said: “Calmer and more positive markets at the start of this year encouraged more pension savers to dip into their pots.

“The pandemic had sent jitters through the markets during 2020, spooking some retirees, who put the brakes on their pension payments, so the average withdrawn hit record lows. In early 2021, despite the market recovery, they were still wary of taking too much. The average was higher than at any other stage since the onset of the pandemic, but down 4% in a year and low by historic standards.”

Tom Selby, senior analyst at AJ Bell, said: “With 2020 now thankfully behind us, pension withdrawal patterns appear to be returning to what we saw before the pandemic struck. This likely reflects increased consumer confidence as society gradually opens up, the success of the vaccine programme and a rally in investments since April last year.”