A third (33 per cent) of people plan to take a tax-free lump sum from their pension, according to new data from Profile Pensions.

Examining changes since the introduction of pension freedoms five years ago, the advice firm found that seven out of ten (70 per cent) people looking to take advantage of the tax-free allowance planned to take the full 25 per cent.

More than half (55 per cent) of those that planned to access some cash through pension freedoms wanted to do so as soon as they reached age 55, while the average age was 58.

While these statistics show that accessing cash is popular, Profile Pensions found that 94 per cent of new customers with defined contribution pensions had at least one pension that did not offer flexible access.

Profile Pensions chief investment officer, Michelle Gribbin, commented that this was “largely because people are holding on to old style pensions that didn’t benefit from the 2015 regulations”, adding that access to tax-free cash and “the ability to leave a pension to a loved one” were key drivers behind transfers to more modern pensions.

Gribbin said: “It’s great to see that people are planning to take advantage of the flexible access to pension funds available to them.

"The fact that the majority plan to take out the exact 25 per cent also indicates that there’s a good level of understanding around the benefits of utilising their tax-free limit. Impartial advice can be crucial to alerting consumers to details such as this.

“In the current climate, many people will be under greater financial pressure than they might have expected to be. Some will be planning to draw on all sorts of rainy-day funds and of course, where suitable, a pension could be one of these options. This is a good example of where being in a flexible pension is crucial.”

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