Older pension savers in the UK are being warned against making hasty decisions about their retirement funds amid growing fears of tax changes and rising living costs. Financial experts say panic withdrawals could leave many without sufficient income in later years.
New figures from the Financial Conduct Authority (FCA) revealed that UK savers withdrew more than £70bn from their pensions in 2024-25, a sharp 36% rise compared to £52bn the previous year. Of this, £18.3bn was tax-free cash, up 62% from £11.3bn in 2023-24.
Experts say this surge is being driven by speculation over potential government cuts to pension tax benefits. Chancellor Rachel Reeves is expected to announce new fiscal measures in her budget on 26 November, fueling uncertainty among retirees.
Experts warn against kneejerk reactions
Financial advisers are urging savers not to let “fear and rumour” dictate their decisions.
Eamonn Prendergast of Palantir Financial Planning stressed: “Pension pots are meant to last decades, not be raided in panic. The government must quash rumours early to give clarity.”
Rachel Vahey at AJ Bell added that many retirees are acting on speculation rather than financial need: “The concern is people are withdrawing because they fear changes, not because it is best for them.”
Currently, pension savers aged 55 and over (57 from April 2028) can take up to 25% of their pot tax-free, capped at £268,275. But uncertainty looms over whether the government will reduce this limit.
Rising costs and tax fears driving withdrawals
Stephen Lowe of Just Group said inflation and higher living costs may be pushing savers to dip into their pensions to cover bills. At the same time, concerns that the Treasury could target tax-free pension cash are also influencing decisions.
These figures follow last year’s announcement that, from April 2027, defined contribution pensions will be included in inheritance tax (IHT) calculations, a move many dubbed an “inheritance tax raid.”
A delicate balancing act for retirees
Reports earlier this year also noted that wealthier pensioners are withdrawing large sums to fund family holidays or give early inheritances to children. While this may reduce future tax liabilities, experts warn it is vital to ensure funds last through retirement.
The consensus among advisers is clear: pension withdrawals should be made based on long-term needs and professional guidance—not fear of sudden policy changes.
