Retirees in the UK should avoid making rash decisions about their pension cash based on “fear and rumour”, experts have warned.
UK households warned not to stockpile cash over ‘fear and rumour’
UK households have been warned not to stockpile cash and withdraw money over “fear and rumour”. Retirees in the UK should avoid making rash decisions about their pension cash based on “fear and rumour”, experts have warned.
Data from the Financial Conduct Authority showed that UK pension savers withdrew more than £70bn from their retirement pots in 2024-25 – up almost 36% on the £52bn taken out the year before.
Of this, £18.3bn was tax-free cash – an increase of 62% on the £11.3bn the previous year. Personal finance experts have blamed “budget jitters and fiscal rumours” on the trend, ahead of the Labour Party Chancellor Rachel Reeves’ Autumn Statement.
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Eamonn Prendergast, a chartered financial adviser at Palantir Financial Planning, said pension pots were “meant to last decades, not be raided in panic. The government must do more to quash rumours early and give clarity.”
Rachel Vahey at the investment platform AJ Bell said the concern is “people aren’t making decisions based on what’s best for them but because they are worried about possible changes to pensions tax incentives”.
It comes as Chancellor Rachel Reeves has launched an inheritance tax raid on savers in the Budget by making pensions liable for the levy.
Pensions will be included in the assets that count towards 40 per cent inheritance tax from April 2027, throwing family legacy plans into turmoil.
“Faced with the prospect of seeing their hard-earned pension funds heavily taxed after their death, many older individuals are considering a different approach: spending more of their pension while they are alive,” Anick Sharma, a financial planner at Videre Financial Planning, says.
Sharma added: “The reasoning is simple – why leave behind wealth that will be significantly eroded by tax when it could be enjoyed in the present?”
Stephen Lowe at the retirement specialist Just Group said the sums being withdrawn might also reflect concern the Treasury may view tax-free cash as “an easy target”.