New figures from the FCA show that in the 12 months to March 2025 there was a surge in people accessing pension pots worth more than a quarter of a million pounds.
The number went up in the six months between April 2024 and September 2024, coinciding with fears that the first Budget of the new Labour government would include measures such as capping or scrapping tax free lump sums.
But the number went up again in October 2024 - March 2025, clearly in response to the Budget announcement that pensions would be included in the IHT net from April 2027.
In total, over £53 billion was taken out over the year in cases where pension pots were moved into drawdown but not fully emptied out.
In April to September 2023, 16,447 pots over £250,000 were taken into drawdown. This figure rose to 18,385 between October 2023 and March 2024, and again to 25,069 between April and September 2024. The most recent figures show that 33,475 pots were accessed between October 2024 and March 2025.
Steve Webb, former pensions minister and partner at pensions consultants LCP, commented: “These figures show graphically how uncertainty about pensions and tax can move the market. In the six months before the October 2024 Budget there was a surge in larger pension pots being accessed, mainly because of fears about reductions in limits on tax free cash.
"But after the Budget, where there was no change to tax free cash, withdrawals of large pots accelerated. This is likely to reflect the change in pensions and IHT, with people starting to explore ways of moving money out of the IHT net ahead of the 2027 changes. Given that pensions should be a long-term business, it is deeply disappointing that consumer behaviour is being driven so profoundly by uncertainty around public policy.”
Jon Greer, head of retirement policy at Quilter, added: “The FCA’s latest retirement income data for 2024/25 shows the scale of pressure on retirees’ finances, with more pots being accessed, withdrawals rising sharply, and advice levels still worryingly low.
“The total number of pension plans accessed for the first time rose by 8.6% to 961,575 compared to 885,455 in 2023/24. This continued growth highlights how more people are leaning on their pensions earlier, often to meet rising living costs and fill income gaps elsewhere. Some of the increase will also reflect the demographic bulge of baby boomers reaching retirement age, so part of the rise is structural and will naturally continue in the years ahead. But the real concern is the scale of withdrawals and the lack of advice that accompanies them, which risks leaving many without adequate income later in life.
“Speculation about possible cuts to tax-free cash in the upcoming Budget may also have played a role, with a record £18.3bn of tax-free cash taken in 2024/25 compared to £11.25bn the year before. Prior to almost every Budget there are rumours of changes to pension taxation, and while these figures suggest many people are acting on speculation, this is not necessarily the right approach. Any decision to take tax-free cash should be part of a carefully considered financial plan, not a knee-jerk reaction to rumour.
“The value taken from pension pots overall leapt by more than a third, rising 35.9% from £52.2bn in 2023/24 to £70.9bn in 2024/25. Drawdown products saw the largest increase in uptake, with sales climbing 25.5% to 349,992, cementing their position as the dominant choice for retirement income. While flexibility remains attractive, it also exposes retirees to the risk of depleting their savings too quickly if withdrawals are not carefully managed.
“Just 30.6% of people sought regulated advice before accessing their pension, down slightly on the previous year. With nearly seven in ten making complex decisions without professional help, there is a real risk of retirees taking unsustainable withdrawals or making choices that could undermine their long-term financial security. Worryingly, the FCA’s data shows that most people in drawdown are taking regular withdrawals of more than 8% a year, levels at which pots are unlikely to last.
“This is exactly where reforms to deliver simplified advice and targeted support can make a difference, giving people accessible, timely guidance that steers them towards more sustainable decisions without forcing them into a full advice process if they don’t need it."
