Key facts
- Total pension withdrawals reached £91.2bn in the year ending March 31, 2026, a 70% increase over two years.
- Fears of tax changes and upcoming inheritance tax (IHT) rules are driving increased withdrawals.
- The proportion of pension pots valued at £250,000 or more that were accessed increased to 8.6%.
- Over 320,000 pension plans were withdrawn at an annual rate of 8% or higher.
- Tax-free cash withdrawals rose to £22.1bn in the year ending March 31, 2026.
- Unused pension funds will be included in inheritance tax calculations from April 2027.
The amount of money being withdrawn from pensions has surged significantly amid growing concerns over potential government tax changes and the forthcoming introduction of inheritance tax (IHT) on unused pension funds. New figures from the Financial Conduct Authority (FCA) show that the total value withdrawn from pension pots increased by 70% over the two years to the end of March 2026, reaching £91.2bn.
In the year ending March 31, 2026, withdrawals rose by 21.7% to £91.2bn, up from £75bn in the previous year and £53.6bn in 2023/24. This increase outpaced the growth in the number of pensions accessed, suggesting retirees are taking larger sums. The proportion of pension pots valued at £250,000 or more that were accessed also rose to 8.6% in the latest financial year, compared to 4.8% in 2023/24.
Fears surrounding potential caps on tax-free cash allowances, particularly in the run-up to the 2024 and 2025 Budgets, have prompted many to withdraw funds. Additionally, the announcement that most unused pension funds will be brought within the scope of inheritance tax from April 2027 has led some wealthy retirees to move money out of their pensions to reduce their potential IHT exposure. The number of people with pots over £250,000 entering drawdown more than doubled between 2023/24 and 2025/26.
Tax-free lump sum withdrawals specifically jumped by over a fifth to £22.1bn in the year ending March 31, 2026, following a 63% surge the previous year. Jemma Slingo, pensions and investment specialist at Fidelity International, noted that uncertainty and speculation about retirement rule changes have influenced behaviour, making long-term planning more difficult. Andrew King, retirement specialist at Evelyn Partners, warned that withdrawals made in anticipation of policy changes could lead to additional taxes and reduce future retirement income.