UK Pension Withdrawals Surge Amid Uncertainty Over Tax Changes

Pension withdrawals reached £91.2bn in 2025-26, a 70% increase from 2023-24, as uncertainty over government policy appears to have influenced retirement planning.

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25 September 2026

The amount of money being withdrawn from UK pension pots accessed for the first time has risen sharply, with experts pointing to uncertainty over government tax and pension policy as one factor behind the increase.

According to figures reported by Sky News, £91.2bn was withdrawn from pension pots during 2025-26, compared with £53.6bn in 2023-24. That represents an increase of about 70%.

The rise has occurred alongside major changes to the tax treatment of pensions and speculation over possible further changes to pension rules.

Withdrawals rose around major tax announcements

Pension withdrawals increased during 2024-25 in the period leading up to Labour's first Budget and rose again after the government announced that most unused pension funds and pension death benefits would come within the scope of Inheritance Tax from April 2027.

The government has legislated for the change. From 6 April 2027, most unused pension funds and pension death benefits will be included when calculating the value of an individual's estate for Inheritance Tax purposes.

Some benefits, including death-in-service benefits from registered pension schemes, will remain outside the scope of the change. Former pensions minister Steve Webb said uncertainty over tax and pension policy appeared to have contributed to the high level of withdrawals.

He also pointed to earlier speculation about possible restrictions on tax-free pension withdrawals. That speculation did not result in the reported changes, but some people nevertheless accessed pension savings earlier than they otherwise might have.

Experts warn about long-term financial decisions

Webb, now a partner at consulting firm LCP, said uncertainty could affect how people make decisions about their retirement savings.

The concern is that people who withdraw pension money earlier than planned may leave less of their savings invested for the future. The issue has also drawn attention from investment platform AJ Bell, which has written to Chancellor John Healey ahead of the Budget scheduled for 28 October.

AJ Bell chief executive Michael Summersgill said the withdrawal figures showed the potential consequences of uncertainty around pension taxation and argued that early withdrawals could reduce the amount of capital available for long-term investment.

The Treasury has been contacted for comment.

What is changing in 2027?

The Inheritance Tax reform was announced at the Autumn Budget 2024 and is now part of legislation.

From April 2027, most unused pension funds and pension death benefits will form part of an individual's estate for Inheritance Tax purposes. The government says the reform is intended to change the tax treatment of pensions that can otherwise be used to transfer wealth after death.

HM Revenue & Customs estimates that most estates will still have no Inheritance Tax liability after the reform. However, it expects the change to affect some estates that contain inheritable pension wealth. The government has continued to publish technical guidance ahead of the April 2027 implementation, including rules covering information sharing, reporting and the payment of any tax due.

Budget approaches

The latest pension withdrawal figures come weeks before the UK's next Budget, scheduled for 28 October.

With pension taxation already changing and concerns about policy uncertainty being raised by industry figures, retirement planning is likely to remain an important issue for pension savers and the financial sector.

For millions of people with workplace and private pensions, decisions about when and how much to withdraw can have long-term consequences for their retirement income.

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