UK pension savers are increasingly dipping into their tax-free pension cash, with £18.08 billion withdrawn in 2024/25, a 61 per cent rise on the previous year, according to FCA data obtained by Evelyn Partners.
According to the data, £10.43 billion was taken in the six months to March 2025 alone, 72 per cent more than in 2024.
Additionally, many are taking their lump sums early, with 111,869 withdrawals in the last six months, up a third on a year earlier, as savers try to secure their 25 per cent tax-free entitlement while it remains available.
Since the Lifetime Allowance was abolished in 2023, many opt to take the cash immediately rather than gradually. According to data from the Department for Work and Pensions, early access is becoming increasingly common, with £36 billion of the £103 billion withdrawn since 2015 going to those under 60 and nearly £29 billion to those aged 60–64, showing younger retirees are using pensions early to manage financial pressures and uncertainty.
Evelyn Partners says many withdrawals are fear-driven rather than need-based and warns that taking PCLS without a plan can harm long-term retirement. The firm expects any future Government limits to include transitional protections and stresses the importance of professional financial advice.
Evelyn Partners chief financial planning officer Emma Sterland says: “These are quite startling figures showing that the country’s pension savers have been in an unprecedented rush to take their tax-free lump sums.
”That withdrawals soared 72 per cent to more than £10billion in the second half of the last financial year is an extraordinary increase compared to the period just before the last General Election, and it seems certain some of this was prompted by changes, both actual and feared, to Government policy on the taxation of pensions, as well pressures such as the cost of living and higher interest rates.
“Some of the increase in the six months up to April 2025 will likely be down to families reacting to the inclusion of unspent pension assets in inheritance tax calculations from April 2027, which was announced at the Chancellor’s first Budget on 30 October 2024.
“But the fact that PCLS withdrawals were already surging rapidly in the summer of 2024, and the sheer volume since then, suggests strongly that there is another factor at play – the fear that the Government would cut tax-free cash in some way at the last Budget, and might still do so at the next. This is backed up by our conversations with clients.
“While some savers and retirees will doubtless have taken their tax-free cash as part of a well-thought-out plan, you can’t help feeling that much of this increase is a slightly panicked dive into pensions sparked by uncertainty over policy change, particularly among those who aren’t benefitting from expert financial advice.”
Sterland added: “That sparked a rush of enquiries from concerned clients last summer and autumn, and our financial planners are experiencing something similar this year. The 25 per cent tax-free cash is a treasured pension benefit and hugely important to savers. Many savers have a specific purpose in mind for their PCLS – such as clearing outstanding mortgages, gifting to children, or a carefully thought-out income strategy – and while they ideally might not take it quite yet, they are also wrestling with the fear that if they don’t it could be curtailed, and they will lose out.
“These concerns must have been a big driver behind the acceleration of PCLS withdrawals that our FOI has revealed, on top of the incentive to draw down on pension pots that has been created by the inclusion of unspent pension assets in IHT liabilities from April 2027. And as such speculation has not been quashed by the Treasury this year, you can’t really blame savers from worrying that tax-free cash might be on the 2025 Budget table.
“It is impossible to give guidance to people on what to do as individual circumstance vary so greatly and we are as in the dark as anyone else on the Treasury’s plans. But a rule of thumb suggests that if you have a clear purpose for your tax-free cash and were thinking of taking it shortly anyway, then – if you believe there is a chance of it being restricted – there might not be much harm in accelerating that step by a year or two, but we would always recommend taking advice before extracting large sums.
“For instance, trusts can be a very useful tool to hold sums that aren’t immediately needed or are intended for gifting and that is certainly an area where expert advice is essential.
“Taking tax-free cash early, without a particular need for it, means that you are taking funds that are growing in a tax-protected environment to one where they could be subject to capital gains, dividend or savings interest taxation. Many people last year who withdrew their PCLS purely due to Budget fears found themselves scrambling to try and reverse the process when nothing happened – with varying degrees of success.
“While it is not pleasant to think about, if someone withdraws their tax free cash now – when it is still exempt from IHT while it sits in the pension – and then dies before April 2027, they will have taken their funds from an IHT-free environment to a taxable one, as the money will enter their estate for IHT purposes, even if they gift it.’
Sterland says: “A reduction in tax-free cash would feel to many who have yet to take their PCLS, whether they are retired yet or not, like the goalposts are being moved as they’re halfway down the pitch and would be deeply unpopular. So it’s likely – and hoped – that if any such step is on the cards, then transitional arrangements would be put in place to help those closer to retirement and who are already eligible to take their tax free cash, as there were when previous reductions were made to the Lifetime Allowance and people could apply for protection to preserve access to higher allowances.
“A danger for the Government is that tinkering with tax-free cash could weaken pension saving at a time when they have launched a commission to look at how it can be stimulated, and when state pension provision is coming under the spotlight as being unsustainable in the long term. There’s also evidence that tax-free cash aside, many savers are drawing on or cashing in their pensions quite early on.”
Sterland adds: ‘Some of this may be quite intentional, as it’s currently possible to access your private pension savings from the age of 55 and that is a point when some better-off savers start thinking about retirement.
“But It’s obvious that funds taken from a pension before retirement will leave less to fund retirement itself, and we would encourage all savers who have amassed significant pots to seek professional financial advice before starting to access their pensions. Financial planners can run cash-flow modelling based on different scenarios to illustrate how today’s decisions will unfold down the line, and that provides much greater confidence to know when and how it is best to start using your pension savings.”
