Key facts
- The number of UK pension plans fully withdrawn has risen by 29% since the 2018-19 tax year, an increase of 105,038 savers annually.
- In the 2024-25 tax year, over 300,000 pension pots withdrawn in full were valued under £10,000.
- Taking an entire pension pot in one go is taxed as income, potentially pushing retirees into higher tax brackets.
- Ad hoc partial withdrawals have also seen a 101% increase over the same period.
- Experts warn this trend signals inadequate retirement savings and a growing retirement savings gap in the UK.
- The rate of full pension withdrawals has risen by 75% among those aged 65-74.
A significant and growing number of UK retirees are opting to withdraw their entire pension pots in a single lump sum, a trend that experts are calling a "worrying signal" for the adequacy of retirement savings in the country. Data from the Financial Conduct Authority (FCA), analyzed by TPT Retirement Solutions, shows that since the 2018-19 tax year, the number of people cashing in their pensions in full has increased by 29%, equating to an additional 105,038 savers annually.
This practice can lead to substantial and unexpected tax bills, as the full withdrawal is treated as income for that tax year, potentially pushing individuals into higher tax brackets. This means a significant portion of their retirement savings may be paid directly to HMRC. The scale of modest pension pots being emptied is notable, with over 300,000 full withdrawals in the 2024-25 tax year valued at less than £10,000, and a further 112,526 pots between £10,000 and £29,000.
The surge in full withdrawals suggests that for many, retirement savings are simply not sufficient to provide a meaningful income through gradual drawdown arrangements. This concern is amplified by a 101% increase in ad hoc partial withdrawals over the same period, indicating a broader struggle with retirement provision. The trend is particularly pronounced among older retirees, with a 75% increase in full withdrawals among those aged 65-74, compared to a 15% rise for those aged 55-64.
Georgie Edwards, DC Proposition Associate Director at TPT Retirement Solutions, highlighted that for many, this is not a strategic choice but a necessity due to insufficient savings. She also noted that some savers may be reluctant to consolidate pots, missing opportunities for more sustainable income. Additionally, some individuals might be constrained by legacy pension products that lack flexible drawdown options, forcing larger withdrawals and increasing tax exposure.