Lloyds Banking Group PLC's (LSE:LLOY) insurance subsidiary has revealed three-quarters of customers with defined contribution pensions have taken funds from them before retiring.
Scottish Widows, which manages a £17 billion annuity fund, revealed that 78% of people had taken cash from their pension pot early, typically withdrawing around £47,000.
More than half of those who dip into their reserves early were found to have done it five years before their selected retirement age (SRA), while a fifth were found to have siphoned cash nine to ten years early.
Scottish Widows pointed out that if the early dippers had avoided withdrawing funds from the age of 55 for an additional five years, they could have seen their pension pot grow by an extra £13,900.
If people were able to avoid pulling £47,000 out of their funds by 65 years old, this amount could potentially grow by £24,000 and by £38,000 within 15 years.
Graeme Bold, the director of workplace pensions at Scottish Widows, said: “Our data shows that the vast majority of people withdraw money from their workplace pension before reaching retirement age.
“Whilst early withdrawals are often an unavoidable necessity, draining a pension pot too soon can carry risks which both providers and retirees should be taking steps to guard against where possible.
“More needs to be done to encourage people to keep their pensions invested for as long as possible. It’s up to pension providers to have the support in place for people through a lifetime of investment.”