Savers withdrew £70.9bn from pension pots in 2024/25 as tax-change fears mount

Retirees and near-retirees withdrew a record £70.9 billion from UK pension pots in 2024/25, the Financial Conduct Authority said, a 36% increase on the previous year and a surge regulators and advisers say was driven in part by fears of impending tax changes.

The FCA figures showed the total value of money taken from pensions rose from £52.2 billion in 2023/24 to £70.9 billion in 2024/25. The sharp rise in withdrawals comes amid public concern and media speculation that the Chancellor could reduce the amount of pension savings that can be taken tax free, and while ministers consider reforms to how pensions are taxed.

Savers can currently withdraw up to a quarter of their pension pot tax free from age 55, subject to a maximum tax-free lump sum of £268,275. The possibility of a lower tax-free withdrawal has been advanced by Torsten Bell, who was appointed pensions minister this year and has proposed cutting the tax-free threshold to around £40,000. Bell has also called for a rebalancing of pension tax relief, which the notes say cost taxpayers £48.7 billion in 2023.

Analysts and industry figures warned that pre-emptive withdrawals could harm many savers’ long-term incomes. Andrew King, a retirement specialist at wealth manager Evelyn Partners, urged caution, saying pension holders should “think twice before making major withdrawals from their pots, especially in anticipation of rumoured policy changes that might not materialise.”

The FCA data also showed that a minority of those accessing pensions for the first time had received regulated advice: 30.6% of first-time accesses in 2024/25 involved regulated advice, marginally down from 30.9% the prior year. Regulators and advisers have repeatedly emphasised that decisions to encash pension rights are complex and can carry lasting tax and retirement-income consequences.

Policy attention on pensions has intensified after the Chancellor moved to bring retirement savings into the inheritance tax regime from 2027, a change that has increased scrutiny of wider pension taxation. Officials preparing the autumn Budget have signalled that pensions and tax relief are under review, but ministers have not confirmed the precise shape or timing of any further changes.

Industry groups said abrupt policy shifts or even persistent speculation can prompt short-term behaviour that increases financial risk for individuals. Pension providers and advisory bodies continue to recommend that savers seek regulated advice before making one-off decisions to withdraw substantial sums, and that they consider the long-term impact on retirement income and tax liabilities.

The government has not published detailed proposals for cutting the tax-free lump sum, and any concrete measures would be expected to form part of the Chancellor’s autumn Budget plans. Policymakers and industry participants will be watching both FCA trends and the Budget timetable for indications of whether the spike in withdrawals represents a one-off response to anxiety or the start of a longer-term shift in how Britons use pension savings.