WHEN he announced sweeping pensions reforms back in 2014, then Chancellor George Osborne said he was doing so to reject the suggestion that “pensioners can’t be trusted with their own pension pots”. Five years on and it appears that more than a million of them would tend to agree.

Under the reforms, which came into effect in 2015, Mr Osborne enabled anyone over the age of 55 to withdraw cash from their money-purchase pensions. Previously, they had been forced to wait until retirement to access their money and even then had had to use it to buy an annuity.

Figures released by HM Revenue & Customs this week have revealed the popularity of the change, with 1,113,000 people dipping into their pots in the past four years, withdrawing a combined £25.6 billion between them.

READ MORE: Does regulator’s new stance on pension transfers mean you should cash yours in?

Though the number of people accessing their cash in this way has steadily increased – from 232,000 in the year from April 2015 to 539,000 in the last financial year - the average amount they have taken out has fallen. In 2015/16, savers taking advantage of the change withdrew an average of £18,750 while in 2018/19 they took just under £15,200.

For Steven Cameron, pension director at financial services business Aegon, this should be taken as a positive, as it indicates that savers are exercising caution when choosing to run down retirement pots that will have to last for a lifetime.

“This is encouraging as with greater flexibility comes greater responsibility and the freedoms have also introduced an increased risk,” he said.

“Historically, retirees would receive a fixed income which would last them for the rest of their life, but now many are responsible for investing appropriately and ensuring they do not overspend, risking their pension pot running dry part-way through retirement.

“The more people who take advantage of pension freedoms, the greater is the need for access to professional financial advice.”

However, research from Canada Life has revealed that a significant number of savers are accessing their cash without taking that advice, something that is only legally required if the sum being taken out is in excess of £30,000.

As around a third of those responding to the research said they had withdrawn their cash to put it in a bank account instead – incurring a tax charge in the process - Canada Life technical director Andrew Tully warned that savers could be making non-advised decisions that turn out not to be in their best interests.

READ MORE: Pensioners cash in pots on back of inflated transfer values

“Pensions continue to be treated as cash machines with the latest data showing a record amount withdrawn in the last tax year, up over £1.5bn from the 2017/18 tax year,” he said.

“While this behaviour may not be cause for concern just yet, our research suggests only a third of people seek advice before flexibly accessing their pension.

“This can leave consumers exposed to a new set of risks including paying too much tax than necessary on withdrawals or leaving the money languishing in low or near-zero paying deposit accounts.”

Sean McCann, a chartered financial planner at NFU Mutual, agreed, noting that savers should only ever consider dipping into their pension pots as an absolute last resort.

“If you take money out of a pension, you’re taking it out of a protective wrapper that shields it from income tax, capital gains tax and, crucially in most cases, inheritance tax,” he said.

“The protection from these taxes can be passed down through generations too without HMRC taking a large slice.

“Those that can afford to should take money from their ISAs or other investments before they dip into the most tax efficient of all their assets.”

READ MORE: Is the planned Royal Mail scheme the answer to our pension woes?

With research issued by the Department for Work and Pensions last month indicating that pension scheme members who use the Government’s free advisory service Pension Wise have a better understanding of how the pension freedoms work than non-users the implication is clear: everyone looking to access their pension savings should seek financial advice first, regardless of the sum they are looking to take out.

“Pension freedoms transferred all of the risks around retirement onto the consumer and with that comes much greater responsibility,” Mr Tully said.

“The risk of running out of money is very real, as there are no mechanisms to prevent people depleting their pots too quickly.

"Conversely, there is also the risk that people don’t spend enough in retirement for fear of running out of money.

“Without the right financial advice, most consumers will not achieve the best outcome in retirement.”