From MoneyWeek · · 1m 50s
Pensioners withdraw record tax-free lump sums
Pensioners took over £22 billion in tax-free lump sums this tax year, risking retirement savings.
In brief
Pensioners took over £22 billion in tax-free lump sums this tax year, risking retirement savings. Pensioners withdrew £22 billion in tax-free lump sums during 2025/26 tax year, raising concerns about premature pension withdrawals. Originally reported by MoneyWeek.
Pensioners withdraw record tax-free lump sums
Retirees withdrew over £22 billion from their pensions in tax-free lump sums in the 2025/26 tax year, up more than 20% compared to the previous tax year.
Tax-free lump sums rose sharply
Pensioners took over £40 billion in tax-free lump sums in the last two tax years alone, according to Financial Conduct Authority data.
Tax-free cash rules allow up to 25%
Under pension tax-free cash rules, you can normally withdraw up to 25% of your pension pots free from tax.
Experts link withdrawals to tax fears
Experts at AJ Bell say the boom in withdrawals may have been driven by fears of increased taxation at Labour's first two Budgets.
Withdrawals surged in 2024/25
FCA data shows the total taken in tax-free pension lump sums rose to £18.3 billion in 2024/25, up from £10 billion in 2023/24.
Chancellor left tax-free cash untouched
Despite speculation of a tax raid, chancellor Rachel Reeves left pension tax-free cash untouched in the 2025 Autumn Budget.
AJ Bell warns of economic risks
AJ Bell's chief executive Michael Summersgill said the rush to take tax-free cash began in 2024 and risks reducing long-term investment capital.
AJ Bell urges tax stability
AJ Bell has urged the new chancellor John Healey to publicly commit to not making major changes to pension tax-free cash rules.
Risks of early withdrawals
Early withdrawals risk lower compound interest growth and potential tax consequences if you change your mind.
Here's the gist
Pensioners withdrew £22 billion in tax-free lump sums during 2025/26 tax year, raising concerns about premature pension withdrawals.
