Pension savers in the UK rushed to withdraw their 25% tax-free cash lump sums in unprecedented volumes in 2024/25, new data shows.
Figures from the Financial Conduct Authority, obtained by wealth manager Evelyn Partners, show that the amount taken from pensions as tax-free lump sums in the six months to the end of March 2025 was £10.43bn. That’s a 72% increase on the same period last year, when savers took out £6.07bn in tax-free cash.
The record tax-free cash withdrawals came amid speculation around whether the government was considering cutting the tax-free cash allowance, which has so far not happened.
Emma Sterland, chief financial planning officer at Evelyn Partners, said the “startling figures” are an “extraordinary increase” compared to the period before the last general election, and it appears it was prompted by policy changes “both actual and feared”.
She said reports last year that the Treasury could consider reducing the cap on tax-free cash to £100,000 or even lower – down from the current cap of £268,275 – led to clients panicking about their pensions, and advisers are still seeing concern that it could happen this year.
“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,” she said.
“But the fact that 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.
“That sparked a rush of enquiries from concerned clients last summer and autumn, and our financial planners are experiencing something similar this year. 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.”
