The average retirement income withdrawal rate, which stands at 6.2 per cent of the fund value, could quickly become unsustainable in the long term, Royal London has suggested.

According to the latest data analysing the behaviour of income drawdown customers and the sustainability of withdrawal rates over different terms, Royal London noted that over a 15 year term, a six per cent withdrawal rate is “highly sustainable”. However, as the term increases, a six per cent withdrawal rate can soon become unsustainable.

Royal London stated that over two thirds, 67 per cent, of its income drawdown customers are aged between 60 and 69 with an average fund value, at the time of analysis, of £94,800. If these customers were to take a continued income at over 6 per cent per year, 15 years later they could find that their fund does not meet their income needs. As a result, the firm encourages taking financial planning advice to avoid later income difficulties.

Furthermore, the analysis also found that 75 per cent of customers initially took their tax free cash and then begun taking regular income a few years later. There are, however, a small but growing number of drawdown members who are beginning to take an income from the outset. Royal London saw that at the beginning of 2016, 19 per cent of it Drawdown Governance Service customers took an income immediately, this number grew to 25 per cent by the end of 2016.

Royal London, pensions investment strategy manager Lorna Blyth, commented: “Identifying any emerging trends is important in the early days of pension freedoms as there remain concerns that people could potentially run out of money. The evidence suggests that, with the benefit of impartial financial advice, this is not likely to happen.

“The analysis also shows that the vast majority of customers are taking a fixed rate of income which means they are not making any allowance for inflation. This might be ok while we have low inflation rates but the latest data from the Bank of England shows inflation is above the government’s target rate and one of the risks that advisers may well need to discuss with their clients at their next review.

“The increase in the number of customers taking income from the outset is interesting and we’ll monitor this to establish whether this is a new trend that is replicated across the industry.”

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