The pension withdrawal surge in 2025/26 has produced figures that any long-term portfolio planner should read carefully: £91.2bn was withdrawn from pension pots accessed for the first time, a 22% rise from £75bn the previous year and 70% higher than the £53.6bn recorded in 2023/24, according to new data from the Financial Conduct Authority. The number of pensions being accessed rose only 7% year-on-year to just over 1.04 million, meaning the average sum leaving each pot has grown considerably.
Why the Pension Withdrawal Surge in 2025 Is More Than a Headline
The gap between the 22% increase in money withdrawn and the 7% increase in plans being accessed tells its own story. Larger sums are leaving pension wrappers, and the driver appears to be a combination of policy anxiety and a very real structural change. Two factors are cited repeatedly by advisers: speculation ahead of the Autumn 2024 Budget that the government might restrict tax-free cash, and the confirmed decision to bring most unused pension funds within estates for inheritance tax (IHT) from April 2027.
Steve Webb, partner at LCP, noted that the number of people with pots worth more than £250,000 entering drawdown more than doubled in two years, from 34,712 in 2023/24 to 75,968 in 2025/26. The proportion of pots of that size being accessed rose from 5% to 9% over the same period. Webb said: “It is very worrying that uncertainties about government policy on tax and pensions seems to have driven very high levels of withdrawals from pension pots. The speculation around caps on tax-free cash was unfounded, but this did not prevent people from rushing to access their pensions, potentially losing out on further investment returns as a result.”
Tax-free cash withdrawals have risen sharply in parallel. Some £22.1bn was taken as pension commencement lump sums during 2025/26, up 21% from £18.3bn the previous year. Across the two years from April 2024 to March 2026, £40.4bn was withdrawn as tax-free cash, 109% more than the £19.3bn taken in the preceding two years.
The Risk of Reacting to Policy Uncertainty
For anyone managing a self-invested personal pension or approaching drawdown, the warning from Andrew King, retirement specialist at Evelyn Partners, deserves attention. He cautioned that withdrawals made in anticipation of policy changes could trigger additional tax liabilities, remove capital from a tax-efficient environment and reduce future retirement income. Those outcomes compound over a long horizon in ways that a short-term policy concern rarely justifies.
Fidelity International pensions and investment specialist Jemma Slingo put it plainly: “Retirement planning is measured in decades, not Budget cycles, taking tax-free cash shouldn’t be a knee-jerk response to unconfirmed rumours.” For someone in the accumulation phase or early drawdown, that framing is the correct one. Over a ten-to-twenty-year horizon, the compounding effect of money retained inside a pension wrapper will in most scenarios outweigh the benefit of early withdrawal driven by speculation.
The FCA data also shows a quieter but arguably more rational trend: annuity purchases rose 13%, from 88,430 to 100,144. Advised annuity purchases involving pots of at least £100,000 increased 95% in the six months to March 2026 compared with the same period a year earlier, according to Standard Life. That recovery suggests some retirees are responding to complexity not by withdrawing wholesale, but by locking in a guaranteed income floor alongside flexible assets, a structurally sounder response to sequence-of-returns risk than emptying a pot ahead of schedule.
