Withdrawals of tax-free pension cash have surged amid budget speculation.
Discover why acting too soon could harm long-term growth — and why advice is essential.
One of the most notable pension trends of the past year has been a sharp rise in people accessing their pension tax-free cash. Industry data from the FCA and HMRC shows that withdrawals have surged as speculation grows over potential government changes to the pension tax-free lump sum.
However, no official proposals have been made, and experts suggest that any changes would take time to implement, with protections for existing savers likely to apply.
1) A surge in withdrawals
Many people eligible to take their PCLS (Pension Commencement Lump Sum) have done so out of concern that the rules could change.
- In the six months to March 2025, 111,869 people accessed tax-free cash (33% more than the year before), withdrawing £10.4 billion in total. (Actuarial Post)
- Across the 2024/25 tax year (April 2024 to April 2025), £18 billion was taken as PCLS (a 61% increase on the previous year). (MoneyWeek)
- Yet only one in three people sought regulated financial advice before accessing their pension. (FCA Retirement Income Data 2024/25)
This growing trend suggests many are reacting to speculation, rather than making long-term financial plans.
2) The risks of taking cash too soon
Taking tax-free cash may feel like a sensible precaution; however, withdrawing it too early can have lasting effects:
- Lost compounding: once money leaves your pension, it no longer grows tax-efficiently.
- Reduced retirement income: withdrawing early leaves less invested for later life.
- Longevity risk: taking too much too soon can mean running out of savings later.
Acting in haste could mean missing out on valuable growth, leaving yourself short in retirement.
3) What experts are saying
Pension specialists have emphasised that there is no confirmed plan to remove the 25% tax-free entitlement, and that any significant reform would likely be phased in gradually.
Major pension policy changes require legislation and consultation, meaning immediate action is unlikely.
Next steps
Before making a decision about your pension, it’s important to seek professional advice.
At Omny Personal Finance, we can help you:
- Understand how any policy changes might affect your retirement strategy
- Explore smarter ways to access funds while preserving long-term growth
- Build a resilient plan for the future – whatever the next Budget brings