There has been a scramble to take cash from pensions and beat an impending inheritance tax raid \u2014 and a possible change to the rules around the much cherished tax-free lump sum. <\/p>\n
Between April last year and March this year some 211,000 pension savers took their 25 per cent lump sum \u2014 almost a third more than in the year before.<\/p>\n
They withdrew a total of \u00a318.1 billion, up from \u00a311.25 billion the previous year, according to figures from the Financial Conduct Authority, the City watchdog, obtained by the wealth manager Evelyn Partners. <\/p>\n
The surge coincided with the announcement in October\u2019s budget that most pensions would be included in an estate for inheritance tax purposes from April 2027 (although anything left to a spouse or civil partner will remain exempt). The government estimates that 213,000 estates in the 2027-28 tax year will include inheritable pension wealth. <\/p>\n
Nearly \u00a310.5 billion was withdrawn between October and March after the plans were revealed, compared with \u00a36 billion over the same period the year before.<\/p>\n
But advisers say the rush has also been triggered by speculation that the pensions tax-free lump sum could be in the chancellor\u2019s crosshairs as she tries to raise revenue. In the lead-up to the budget last year and to the spring statement in March concerns were rife that it could be reduced. Rachel Reeves\u2019s budget this year will be on November 26.<\/p>\n
Most savers can take 25 per cent of their pension pot tax-free, up to a limit of \u00a3268,275, when they turn 55 (rising to 57 from 2028). It can be taken all in one go or staggered throughout retirement.<\/p>\n
Emma Sterland from Evelyn Partners said: \u201cWhile some will doubtless have taken their tax-free cash as part of a well thought out plan, you can\u2019t help feeling that much of this increase is a panicked dive into pensions sparked by uncertainty over policy change.\u201d<\/p>\n