Over 61% of UK retirees who accessed tax-free cash from their pensions before last year's Budget now regret their decision. A survey of 5,000 retirees by financial advice firm Quilter earlier this year indicated that 57% withdrew their pension savings prematurely. Of these, 41% acted out of concern that the 25% tax-free lump sum might be capped or abolished.
Despite no indication from Prime Minister Andy Burnham regarding rule changes, pension providers are urging official reassurance ahead of the Budget on Wednesday 28 October. This call aims to avert another surge of panic withdrawals.
HMRC data shows that flexible pension withdrawals reached a record £22.4bn in the 2025-26 tax year, marking a £3.8bn increase from 2024-25. Jon Greer, head of retirement policy at Quilter, noted that this data, combined with Quilter's findings, highlights how pre-Budget speculation led many retirees to act out of fear rather than immediate necessity.
Andrew King, a pensions specialist at Evelyn Partners, highlighted that the 25% tax-free entitlement for defined contribution pensions is often misunderstood. Common misconceptions include believing tax-free cash can only be taken once, must be withdrawn in a single payment, or that taking it limits future savings.