UK (Parliament Politics magazine) – UK pension savers withdrew a record £70.9 billion from retirement pots in 2024-25, up nearly 36% from the previous year, amid widespread “fear and rumour” about impending budget changes. Experts cautioned against rash decisions driven by speculation about Chancellor Rachel Reeves’s November budget, warning such actions could severely damage long-term retirement security.
Record £70.9 Billion Withdrawn from Pensions Amid Heightened Anxiety
As reported by Rupert Jones of The Guardian, UK pension savers withdrew £70.9 billion from their retirement pots in the 2024-25 tax year, representing a 35.9% increase from £52.2 billion in 2023-24. Of this, £18.3 billion was taken as tax-free cash, a 62% surge on the previous year’s £11.3 billion.
The Financial Conduct Authority’s (FCA) latest Retirement Income Market Data revealed nearly one million pension plans were accessed for the first time during the year, an 8.6% rise on the prior period, with drawdown policies showing the largest increase.
Fear and Rumour Driving Withdrawal Spike
Financial experts attribute this unprecedented rise in withdrawals largely to “budget jitters and fiscal rumours” regarding impending pension reforms. Anticipation of changes such as the reduction or capping of the 25% tax-free lump sum and alterations to inheritance tax rules have prompted many savers to access their funds hastily.
Jon Greer, head of retirement at Quilter, emphasised that some of this increase stems from baby boomers retiring; however, he characterised a significant portion as reactive to rising living costs and income pressures elsewhere.
Andrew King, retirement specialist at Evelyn Partners, stated the rise in pension plan access was “substantially greater” than in previous years and linked the acceleration to “uncertainty about pensions and tax” swirling around government policy.
Surge in Tax-Free Cash Withdrawals Heightens Concerns
According to data reported by International Adviser and Saga, £18.3 billion was withdrawn as tax-free cash in 2024-25, a dramatic 61% increase compared to £11.3 billion in 2023-24. Emma Sterland, chief financial planning officer at Evelyn Partners, described this “startling figure” as partly driven by speculation over a possible reduction in the tax-free lump sum cap, currently set at £268,275.
The proposed reforms have sparked anxiety among pension savers concerned about losing this popular benefit, prompting a “slightly panicked dive into pensions,” according to experts.
Policy Uncertainty and Tax Changes Loom
Analysis suggests the spike in pension withdrawals intensified in the six months before and after the October 2024 Budget, when the government announced pensions would be brought into the scope of inheritance tax from April 2027. This announcement brought additional urgency to pension savers concerned about estate planning and potential tax liabilities.
Steve Webb, partner at LCP, lamented that,
“consumer behaviour is being driven so profoundly by uncertainty around public policy,”
Highlighting that pensions are fundamentally a long-term investment that may suffer if savers act precipitously.
Advice Against Kneejerk Decisions by Financial Experts
Financial advisers and consumer groups are urging pension savers to avoid rash decisions propelled by “fear and rumour.” Rupert Jones reported the FCA and industry experts caution that withdrawing large sums prematurely could jeopardise long-term retirement outcomes.
Experts recommend seeking regulated financial advice before accessing pension pots and emphasise the importance of balancing short-term concerns with future income security.
Demographic and Economic Context of Withdrawals
The growing cohort of baby boomers entering retirement naturally increases pension pot access, but this structural factor alone does not fully account for the sharp rise in 2024-25.
Rising living costs and uncertainties about government spending and taxation policies have intensified withdrawal activity by savers trying to mitigate perceived financial risks in an unpredictable economic climate.
Details on Pension Plan Access and Types of Withdrawals
The FCA data further shows that the number of drawdown policies sold surged by 25.5%, from 279,000 in 2023-24 to 350,000 in 2024-25, as more savers chose flexible withdrawal options. Annuities sales also increased by nearly 8%, indicating a mix of strategies among retirees .
Significantly, there was a 68% rise in the number of pension pots worth more than £250,000 accessed for drawdown, a marker of wealthier individuals adjusting their retirement finances possibly in response to tax and policy anxieties.
Potential Long-Term Implications for Pension Security
Experts warn that large-scale accessing of pension pots driven by speculative impulses could undermine the financial security of retirees in the years ahead. The erosion of tax-free lump sum benefits, combined with inheritance tax changes, means that ill-informed decisions could lead to diminished retirement incomes.
Advocates call for clearer government communication to reduce uncertainty and for greater support towards financial literacy so that pension savers can make well-informed choices.
Upcoming Budget and Policy Watch
All eyes are now on the Chancellor Rachel Reeves’s budget announcement on 26 November 2025, with speculation rife about potential pension reforms.
Financial experts advise that savers monitor the policy landscape carefully and prepare strategically rather than react impulsively to speculation or market rumours.
The surge in pension withdrawals driven by “fear and rumour” underscores the fragile intersection of government policy uncertainty and individual financial decision-making in the UK’s retirement landscape.
While some increase reflects natural demographic shifts, experts widely warn against kneejerk pension cash withdrawals that could cause harm in the long run. Savers are advised to seek professional advice and thoughtfully evaluate their financial strategies ahead of significant budget announcements.