Half (50%) of people using pension freedoms rules to draw an income from their pension have not yet hit retirement, according to research for Zurich.
More than 300,000 over-55s are taking a regular income from a pension in drawdown, even though they are still in full or part-time work.
Of those working full-time, more than half (55%) said they could get by easily without their pension cash, as did nearly a third (29%) of those in part-time jobs.
The findings, based on a YouGov survey of 2,000 people who have taken advantage of the pension freedoms, raise fears that hundreds of thousands of savers could be burning through their pension cash too soon.
Alistair Wilson, Zurich's Head of Retail Platform Strategy, said: "Savers drawing a pension income they don't yet need are in danger of leaving a black hole in their finances when they eventually hit retirement.
"They could also be landed with a hefty tax bill if their pay packet and pension income push them into a higher tax bracket. It can be tempting to tap into your pension early, but if you can afford to leave the money invested, where it can keep growing tax efficiently, you could build a bigger pot when you fully retire."
Since the pension reforms were introduced in 2015, savers have been able to unlock a 25% tax free lump sum from their pension, and draw money flexibly, like a bank account. But Zurich's findings reveal many could be taking the money before they really need it.
Wilson said it's likely that some of those in part-time work are retiring gradually and using their pension to plug the income gap. Despite this, almost a third (29%) of these part-time workers admit they do not yet need their pension cash.
Money held in a pension is shielded from income tax, capital gains and inheritance. Taking money out of a pension strips it of its protective tax wrapper, which is why it can be best to leave the money locked up until old age.
Savers who trigger an income from their pots, beyond taking the 25% tax free cash, will also see the amount they can save into a pension slashed to £4,000 a year - reducing their chances of refilling their pot.
Wilson added: "Savers should only consider dipping into their pension as a last resort. If people need to top-up their salary, or pay off a debt, it can be more tax efficient to use money from ISAs or other investments first.
"Making a mistake with your pension can be disastrous - and could mean working on for longer, or facing financial hardship in retirement. Getting guidance or professional advice on your pension is the best way to avoid running out of money in old age."
All figures, unless otherwise stated, are from YouGov Plc.Total sample size was 2028 adults, who have accessed their DC pension since April 1st 2015, of which 1,191 are drawing a regular income in drawdown. Fieldwork was undertaken between 18th - 29th April 2019.
FCA Retirement Income Data Bulletin September 2018 (latest available source) shows 435,769 people took out drawdown between April 2016 and March 2018.If numbers grew at the same pace as October 2017 to March 2018 (90,504), Zurich estimates the population in drawdown would have increased by 181,008 between April 2018 and March 2019, resulting in 616,700 people in drawdown.