Retirees are being warned they are "paying more tax than they need to" as 462,000 rush to withdraw their pension savings in full, according to new data from the Financial Conduct Authority (FCA).
Rise in full pension withdrawals
The number of people cashing in their entire pension pot at first access has increased by 29% since the tax year 2018-19, reaching 462,000 in 2024-25. Over 300,000 of these pots were worth less than £10,000, while 112,526 were valued between £10,000 and £29,000.
Ad hoc withdrawals also surge
Partial withdrawals have also doubled, with 328,419 plans having ad hoc withdrawals in 2024-25 compared to 163,335 in 2018-19 – a 101% increase.
Georgie Edwards, DC Proposition Associate Director at TPT Retirement Solutions, commented: "The rise in people cashing in their pensions in full is a worrying signal about retirement adequacy in the UK. For many, it’s not a strategic choice but a sign their savings aren’t sufficient – and some may also be reluctant to consolidate pots, missing the chance to build a more sustainable income."
Edwards added: "In some cases, savers are stuck in legacy products that don’t offer flexible options like phased drawdown or regular UFPLS, effectively forcing higher withdrawals than they’d prefer and increasing their tax exposure. That’s particularly concerning because full withdrawals are taxed as income, often pushing people into higher tax brackets unnecessarily."
Age group trends
Between 2018 and 2025, there was a 75% increase in 65-74-year-olds withdrawing their pensions in full. For those aged 55 to 64, the rate rose by a lesser 15% over the same period.
The data highlights the need for better financial guidance to help retirees avoid eroding their savings and paying more tax than necessary.
