The stark warning is based on analysis of data published by the Association of British Insurers (ABI) last week which found that 4% of UK savers - or 3,379 people - had withdrawn at least 10% of their pots, while many others withdrew their whole pot in one go.
Schroders predicts that withdrawing 10% from a pension pot every three months would involve taking out 40% a year - based on a £100,000 ($131,043, €115,772) pot - and would wipe out all pension savings in two and a half years.
Morningstar data suggests 3.2% is the highest amount that could be safely drawn each year on a balanced portfolio, taking into account long-term average returns for current market valuations.
However, Schroder’s figures show that even at this rate, if a retiree wanted retirement income of £10,000 a year, increasing with inflation, they would need to start with £312,500.
The asset manager warned that based on research in the US and Europe, as a rule of thumb for UK drawdowns, pensioners should only withdraw 2.5% per year.
“It is important for people to use the guidance available, and to take independent advice.
“Most importantly, most people should not underestimate how much money they may need – some people may live more than thirty years after retirement – so what sounds like a large lump sum doesn’t sound quite so large when spread across that kind of period,” said Sheila Nicoll, head of public policy at Schroders.
The outlook is much bleaker than ABI’s warning that some British savers are withdrawing too much cash from their pension pots and are at risk of running out of money within a decade or less.
Yvonne Braun, ABI’s director of policy, was keen to point out at the time that some savers may have multiple pots or other sources of regular income.
"There may well be other factors at play here, such as people having other retirement income, for instance, final salary pensions or multiple pots,” she said.
Based on ABI’s findings, overall cash lump sum payouts reached £8.2bn for the first full-year since the UK’s pension freedoms were introduced in April 2015.