Marvin OnumonuStandard Life Centre for the Future of Retirement said tax-free pension cash was a strong anchor for many over-55s as they approached retirement.
Research found 42% either planned to take the full 25% tax-free lump sum in one go or had already done so.
Among those planning to take the lump sum, 44% said it would mark the start of their retirement, 32% said it would give them a sense of financial security, and 21% saw it as a completely separate pot of money.
The report looked at how people accessed their retirement funds and found many viewed the tax-free lump sum as a reward after years of saving.
People often separated it from the rest of their pension, treating it as a bonus for big decisions.
Many wanted to simplify their finances before retirement, often using the lump sum to pay off debt or a mortgage for a clean slate.
90% of 55 to 70-year-olds said they wanted their finances to be simple before retiring.
68% felt confident about deciding how and when to take their tax-free cash.
28% of those planning to take a lump sum said they would use it for a big purchase like a car or holiday.
The same percentage planned to use it as initial income for day-to-day expenses before touching the rest of their pension.
22% planned to reinvest it, and 17% wanted to cut their working hours and top up their income with it. 9% had no particular use in mind.
Catherine Foot, director at the Standard Life Centre for the Future of Retirement, said: “The tax-free lump sum is frequently viewed as a reward after many years of saving.
“The psychology at play is interesting and people typically think of this money as a distinct pot, not necessarily treating it as retirement income.
“While retirement income decision-making is regularly associated with feelings of uncertainty, when it comes to tax-free cash many people have a clear plan in mind for the money.”
Foot added: “The decision to take a lump sum in full may be right for many, with many using it to secure a regular income, but it also carries the risk of depleting a pension pot too early if not carefully managed.
“Its influence also exposes the importance of timely, accessible guidance that supports people’s long term financial security, alongside their short-term needs.
“The findings highlight the need for clearer, well-timed and more accessible support to help people understand how and when to use tax-free cash, the trade-offs involved in taking it in full or in stages, and how to balance short-term peace of mind with long-term regular income security.”
