Pension savers in the UK withdrew more than £70 billion from their retirement funds during the 2024/25 financial year, marking a substantial 35.9 per cent increase compared to the previous year, according to new figures from the City regulator.
The Financial Conduct Authority (FCA) data has prompted financial experts to suggest that anticipation of potential tax reforms may have influenced some savers' decisions to access their savings.
The regulator's report also revealed a slight dip in the proportion of first-time pension accesses where regulated advice was sought, falling from 30.9 per cent in 2023/24 to 30.6 per cent in 2024/25.
Concurrently, sales of annuities, which provide a guaranteed income in retirement, saw a 7.8 per cent rise, increasing from 82,061 to 88,430 over the same period.
Andrew King, retirement specialist at wealth management firm Evelyn Partners, said: “You would expect there to be some year-on-year increase in the amounts taken from defined contribution (DC) pension pots as the population ages and more people each year are reaching retirement, or at least the point where they want to access their pension.
“Also the proportion of retirees with DC pensions is rising year-on-year.”
Mr King added: “This surge in pension withdrawals looks like it has been driven by some factors outside of the demographic and structural.”
Mr King highlighted “ongoing concerns” that further changes to pension taxation may be in the autumn Budget.
He also highlighted concerns around moves “to bring unspent pension assets into the scope of inheritance tax from April 2027”.
Rachel Vahey, head of public policy at AJ Bell, said: “The concern is people aren’t making decisions based on what’s best for them but because they are worried about possible changes to pensions tax incentives.”
Jon Greer, head of retirement policy at Quilter, said: “The FCA’s latest retirement income data for 2024/25 shows the scale of pressure on retirees’ finances, with more pots being accessed, withdrawals rising sharply, and advice levels still worryingly low.”
Sir Steve Webb, a former Liberal Democrat pensions minister who is now a partner at pensions consultants LCP (Lane Clark & Peacock) said: “Given that pensions should be a long-term business, it is deeply disappointing that consumer behaviour is being driven so profoundly by uncertainty around public policy.”
The FCA said in its analysis that it started collecting data from all regulated firms that provide retirement income products from April 1 2018.
It said this change “means users should be careful if comparing the more complete data to data from before April 2018”.
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