Older savers are being urged not to make hasty decisions about their pensions as speculation builds over possible tax changes in the chancellor’s autumn budget.
Withdrawals Hit Record Levels
New figures from the Financial Conduct Authority (FCA) show UK pension savers withdrew more than £70bn from their retirement pots in 2024–25. That marks a 36% rise on the £52bn withdrawn the previous year.
Of that sum, £18.3bn was taken as tax-free cash. The figure is up 62% on the £11.3bn withdrawn the year before.
Financial experts believe much of the surge is driven by “fear and rumour” surrounding the upcoming 26 November budget.
Experts Urge Calm
Advisers warn that panic-driven withdrawals could cause lasting harm to people’s long-term finances.
“Pension pots are meant to last decades, not be raided in panic,” said Eamonn Prendergast, chartered financial adviser at Palantir Financial Planning. “The government must do more to quash rumours early and provide clarity.”
Rachel Vahey, head of public policy at AJ Bell, echoed those concerns. “People aren’t making decisions based on what’s best for them,” she said. “They’re reacting to speculation about possible changes to pensions tax incentives.”
Rules and Concerns
Currently, from age 55 (rising to 57 in April 2028), savers can withdraw up to 25% of their pension as a tax-free lump sum. The maximum is capped at £268,275.
But rumours suggest the Treasury may reduce the limit or alter the rules. Rising living costs are also pushing more people to access their savings early, according to Stephen Lowe of retirement specialists Just Group.
He added there was a growing fear that the Treasury could see tax-free cash as “an easy target.”
Wider Tax Debate
Concerns come against a backdrop of wider pension reforms. In October 2024, the government announced that unspent pension money would, from 2027, be included in inheritance tax (IHT) calculations.
Currently, pensions are excluded from estates when IHT is assessed. Critics called the move an “inheritance tax raid.”
Some well-off savers are now withdrawing larger sums to spend on family holidays or to pass on to their children before the rule changes take effect.
Balancing Risks and Needs
Experts stress that while there may be reasons for some people to withdraw money, decisions should be taken carefully.
“For some, taking money early could reduce a future tax bill,” said Lowe. “But everyone must ensure they still have enough income for later life.”
Advisers recommend that savers seek professional guidance before making any large withdrawals.
“Speculation and fear are never good reasons to raid pensions,” Prendergast said. “Good planning and proper advice are.”
