AJ Bell also said anyone planning to increase their withdrawals to maintain their spending power should also think about the impact on the sustainability of their plan.
The provider said: “It is not just those accessing their pension early who could be at risk during this cost of living crisis, a period of high inflation presents a major challenge to anyone drawing a retirement income. Most people will want their pension withdrawals to increase in line with inflation in order to maintain their living standards.
"However, if inflation continues to run above the 2 per cent Bank of England target, this will have a big impact on the sustainability of a withdrawal plan.”
AJ Bell also pointed out for those who want to leave assets to loved ones, leaving as much of their pension untouched as possible will minimise their tax bill.
“This means when you come to flexibly access your pension for the first time, you should think not just of your retirement income strategy but also your IHT plans,” it added.
Selby said: “Anyone considering accessing their pension for the first time or hiking withdrawals to cope with rising living costs should stop and think before making a rash decision. Taking money out of your retirement pot early or withdrawing too much, too soon could have disastrous consequences over the long term.
“What’s more, pensions benefit from generous tax treatment on death, meaning it often makes sense for your retirement to be the last asset you touch.”
alina.khan@ft.com
