Over-75s pension withdrawals driven by inheritance tax concerns rose sharply in the latest year for which data is available, with people aged 75 and over withdrawing £1.4bn in lump sums from private pensions, according to Lubbock Fine Wealth Management. That figure represents a 35% increase from £1bn in the prior year, and the number of individuals making such withdrawals rose 27%, from 65,900 to 83,800.
Lubbock Fine said the increase may partly reflect changes to the inheritance tax treatment of pensions announced by the Government in the October 2024 Autumn Budget. For portfolio holders managing retirement income, the behavioural shift is worth understanding carefully, because accelerating pension withdrawals is not a neutral act.
Over-75s pension withdrawals IHT concern: what is driving the data
The context matters here. Standard Life has published guidance confirming that, from 6 April 2027, most unused pension funds and death benefits will be subject to inheritance tax. That deadline gives savers approaching or in later retirement a defined horizon against which to plan, and the Lubbock Fine data suggests many are already acting on it, whether or not they have taken formal advice.
The concern is understandable. A pension that once sat outside the taxable estate as an efficient vehicle for intergenerational wealth transfer will, under the proposed rules, be drawn into the same IHT calculation as property and other assets. For an over-75 with a sizeable defined contribution pot, the arithmetic can change considerably.
What is less clear from the data alone is whether lump-sum withdrawals are the most appropriate response for any given individual. Drawing down heavily from a pension crystallises income tax liability today, and depending on marginal rate, that charge could rival or exceed a future IHT exposure. The sequencing of withdrawals, the size of the remaining fund, and the interaction with other estate assets all bear on the correct answer. Lubbock Fine’s data captures behaviour; it does not tell us whether that behaviour is well-advised.
Standard Life moves to meet growing demand for IHT guidance
Against this backdrop, Standard Life is preparing to expand its advice proposition into inheritance tax planning. The group also aims to launch its first targeted support proposition around the end of this year as it continues to invest in its retail and digital capabilities. According to Money Marketing, retail gross inflows at Standard Life rose 9% to £3.6bn, helped by increased use of the group’s drawdown proposition and an 8% rise in international bond sales. Those are the kind of commercial signals that encourage a provider to lean further into the advice space.
For savers using a self-invested personal pension (SIPP) or managing income in drawdown, the direction of travel is worth noting. If your existing provider begins to offer structured IHT planning support, that represents a meaningful addition to what has typically been a transactional relationship. However, targeted support and regulated holistic advice are different things, and anyone with a complex estate should be cautious about treating the former as a substitute for the latter.
The over-75 cohort making large lump-sum withdrawals may have sound reasons for doing so, including simplifying an estate, funding gifts, or redirecting assets into structures that carry different tax treatment. Equally, some may be reacting to the headline of the October 2024 budget announcement without a full picture of the income tax consequences. The 27% rise in the number of people making withdrawals, as much as the 35% increase in the total sum, points to a broad-based behavioural response rather than a small group of very large transactions.
With the proposed IHT changes to pension funds taking effect from 6 April 2027, those approaching or already in drawdown have a defined window in which to model the interaction between income tax, inheritance tax and estate planning. That window is best used with professional guidance rather than in reaction to data alone.
