The number of people making taxable pension withdrawals continued to rise to last year according to HMRC data.
These figures show that taxable flexible pension withdrawals reached a record level of £22.4bn in the 2025/26 tax year — taking the total withdrawn since the introduction of pension freedoms in 2015 to more than £124.7bn.
The figures show 1.27 million people made flexible withdrawals during the year, up from 1.14 million in 2024/25.
In the first quarter of 2026, 770,000 individuals withdrew £5.9bn across 1.9m payments, with the average taxable withdrawal rising to £7,700. This represents an 18 per cent increase in the value withdrawn compared with the same quarter in 2025, while there was also a a 15 per cent rise in the number of individuals making withdrawals.
HMRC figures also show there has been a change in the age profile of those making these withdrawals.
In 2016/17, people aged between 55 and 59 received 42 per cent of the total value withdrawn, compared with 29 per cent for those aged 65 and over. By 2025/26, the share received by the 55-59 age group had fallen to 23 per cent, while those aged 65 and over accounted for 46 per cent.
While the record withdrawals generate more tax revenue for the Government, separate HMRC figures, also published today, show that the cost of income tax relief on pension contributions and investment income has also risen steeply in recent years. Although figures for the last year are not yet available, HMRC data shows this cost rising from £47.8bn in 2022/23 to £60.4bn in 2024/25.
LCP partner Steve Webb says that a major contributory factor was fiscal drag, with the Government freezing the level at which people pay higher-rate tax – and therefore qualifying for higher-rate tax relief on pension contributions.
Broadstone’s head of policy, David Brooks said this rise in flexible withdrawals reflects the number of people now retiring with DC pensions. But he adds that the increase may also indicate financial pressures are prompting people to access more of their pension savings.
He says: “The 18 per cent annual increase in the value withdrawn during the first quarter of 2026 compared to the previous year is striking and suggests that financial pressures may be encouraging savers to access more of their pensions.
“The true concern is that we have little conclusive evidence to gauge how savers are accessing their pensions and whether they are doing so in a sustainable way. Pension freedoms provide valuable flexibility but inevitably increase the risk that savings are depleted too quickly, particularly where people underestimate how long their retirement may last.”
Lumera commercial director Maurice Titley also adds the risk that large one-off withdrawals could accelerate the depletion of retirement savings and trigger unexpected tax bills, arguing that forthcoming reforms such as guided retirement and targeted support will require stronger data and technology to help providers support better retirement outcomes.
LCP’s Steve Webb adds: “The constant freezing of tax thresholds and allowances has dragged millions more people into paying higher rates of income tax.
“Although the Government may be tempted to slash tax relief to reduce this rising cost, the politics become very difficult half way through a Parliament. Any change would be complex and technical and could take years to implement. It would deliver little money this side of the next election but would be hugely politically unpopular. The Government may well conclude that it simply has to live with the rising cost of tax relief for now”.
David Little, partner at Evelyn Partners, adds that pension tax charges increased 47 per cent between 2021/22 and 2024/25, from £20.5 billion to £30.1bn, reflecting an ageing population, higher pension withdrawals, inflation-linked income growth and frozen tax thresholds. He says that while pension tax relief remains costly, the Treasury is recovering increasing amounts of tax when savers access their pensions, making relief “at least in part a tax deferral rather than a permanent giveaway.”