The latest data has provided more evidence that Pension Freedom users are putting their withdrawals into bank accounts, according to data provider Moneyfacts.

Moneyfacts says the “savings market is awash with Pension Freedoms cash.”

Banks accounts have seen a flood of cash over the past year, says Moneyfacts, with much of it likely to have come from pension withdrawals.

Moneyfacts says: “Savers pulling their cash out of their pensions may well be a contributor to the rise in deposits in accounts that are accessible without penalties.”

HMRC data shows that the number of individuals taking money out of their pensions has risen to a new record.

Between January and March this year, 348,000 individuals made a withdrawal from their pensions, a 23% increase from the 284,000 who did so in the same quarter of 2019.

Moneyfacts says the value of flexible payments from pensions is also the highest recorded for Q1 of any year since Pension Freedoms began in 2015. Some £2.46bn was withdrawn from pensions flexibly in Q1 2020, a 19% jump from Q1 2019.

Over the same quarter, Bank of England statistics reported £7.8bn was deposited into accounts that are accessible without penalty, including easy access accounts.

This was despite the fact that the average easy access account pays only 0.32% today compared to 0.62% a year ago.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “The rise in the number of individuals choosing to withdraw their pension cash hitting a new high is slightly concerning, especially as the value of withdrawals was the highest recorded for Q1 in any year since Pension Freedoms began.

“Retirees may well be doing so to boost their disposable income in light of the Coronavirus pandemic, however, any immediate respite could have a devastating impact on their pension provisions for the future that they may be unable to recoup.

“One type of savings vehicle consumers appear to be using to hold their pensions cash are easy access accounts, perhaps due to their flexibility and to avoid stock market volatility, but a flood of pensions cash into this market can have consequences that may already be playing out.

“Indeed, savings providers who are inundated with cash may pull deals entirely, add opening restrictions or cut rates to deter investors. The easy access market is already suffering from rate cuts and withdrawals in light of the Coronavirus pandemic and the subsequent base rate cuts, so a flood of pensions cash could result in more reductions or withdrawals.”