Older savers should avoid making rash decisions about their pension cash based on “fear and rumour”, experts urged this week.
The warning came as figures showed a rise in the sums people were pulling out of their retirement pots.
Data from the Financial Conduct Authority showed that UK pension savers withdrew more than £70bn from their retirement pots in 2024-25 – up almost 36% on the £52bn taken out the year before. Of this, £18.3bn was tax-free cash – an increase of 62% on the £11.3bn the previous year.
Many financial experts say “budget jitters and fiscal rumours” are driving this trend as speculation swirls about what measures the chancellor, Rachel Reeves, will announce in her budget on 26 November.
They warn kneejerk decisions could wreak havoc on people’s long-term plans.
Eamonn Prendergast, a chartered financial adviser at Palantir Financial Planning, said pension pots were “meant to last decades, not be raided in panic. The government must do more to quash rumours early and give clarity.”
Rachel Vahey at the investment platform AJ Bell said the concern is “people aren’t making decisions based on what’s best for them but because they are worried about possible changes to pensions tax incentives”.
Currently, from the age of 55 (57 from April 2028) you can usually take up to 25% of your pension as a tax-free lump sum, to a limit of £268,275.
However, there is speculation that the government may slash this maximum or make other changes.
Stephen Lowe at the retirement specialist Just Group said rising living costs could be forcing more people to dip into their pension money to pay the bills, but added that the sums being withdrawn might also reflect concern the Treasury may view tax-free cash as “an easy target”.
The figures came after what some called an “inheritance tax raid” on unspent pension money that was announced last October.
Pensions tend not to be counted as part of a person’s estate for inheritance tax (IHT) purposes. However, from April 2027, money left in a defined contribution pension will be included in IHT calculations.
In March, the Guardian reported that financial firms were reporting a “huge” increase in well-off older people taking sizeable sums out of their pensions to splash out on family holidays and give to their children
The question of whether to take cash out is a complicated area. For some well-off older people it could mean avoiding a bill later. Despite this, it is vital people ensure they have enough money to support themselves through their later years, so individual financial advice is worth seeking.
