Some £4.3 billion has been paid out in 300,000 lump sum payments under the pension freedoms between April 2015 and April 2016, according to research by the Association of British Insurers (ABI).
It also found that the average lump sum payment totals £14,500.
In addition, £3.9 billion has been paid out via 1.03 million drawdown payments, with an average payment of £3,800.
During the last quarter, more than 57% of pension pots had 1% or less withdrawn from them. Just 4% of pots had 10% or more withdrawn.
Annuity products saw a decline in the last quarter, with figures reflecting investments falling from £1.1 billion to £950 million. Flexible retirement income (drawdown) products remained consistent with £1.48 billion being invested.
Yvonne Braun, director of policy, long-term savings and protection at the ABI, said: “The data shows that the freedoms have been implemented successfully, and are working as intended.
“New data seems to indicate most people are taking a sensible approach. However, the data also suggests a minority are withdrawing too much too soon from their pension pot and many other customers are taking their entire pot in one go.
“There may well be other factors at play here, such as people having other retirement income, for instance, final salary pensions or multiple pots. But this is a warning sign that requires further investigation. We need a full picture of these customers’ circumstances and income, which is something we urge regulators and the government to work with all stakeholders to examine.”
Tom McPhail, head of retirement policy at Hargreaves Lansdown, added: “The vast majority of pension savers are using the new freedoms well and making sustainable long-term retirement income decisions. We have seen some fundamental changes in behaviour, with fewer annuities being sold but for higher values and more drawdown plans being used, with lower average values; these are both positive developments.
“We are also seeing many smaller pension pots being cashed out as a single lump sum, and this too is probably a good thing because it is likely to be more efficient than the old approach of paying out a tiny annuity income.
“For most investors, a mix and match retirement income strategy is proving the best solution. A combination of some guaranteed income from the state pension, a final salary scheme or an annuity, combined with some flexible income from drawdown delivers a good mix of security and flexibility.”