More than half of those who reach 55 years old are expected to drawdown around £26,000 from their pension in their tax-free lump sum.
According to Aegon, 17 per cent of people intend to place this chunk of their retirement income into a cash Isa, with 15 per cent planning to deposit their money into a bank account.
Steven Cameron, pensions director at Aegon, said: “Arguably the decision to take cash this way at retirement has become more complicated since the introduction of the pension freedoms.
"Previously the majority of people took their cash and then bought an annuity with the remainder. Now people can access their savings in a variety of ways, including by keeping them invested and drawing an income, or by accessing it all as cash either in one or multiple gos.”
However there are drawbacks to having such a relatively large sum of money to hand.
As soon as money is realised it is subject to inheritance tax. If the pension holder dies before age 75 the savings can be passed on tax free, but tax will be due if they survive beyond age 75, at the income rate of the beneficiary.
Ajay Khosla, investment and pensions consultant at Cockburn Lucas, said: “The 25 per cent tax free lump sum is all well and good if you are withdrawing it with a firm purpose in mind, perhaps to invest in a second home, for instance.
"However, clients should think hard before taking the money just because it is available - if it remains in your pension pot it will grow.”