State pensioners born before 1971 are rushing to fully withdraw money from their pension accounts, with new data showing a significant increase in the number of retirees emptying their pots in one go. In 2024-25, 462,160 pension pots were fully withdrawn when first accessed, marking a 29 per cent rise from 357,122 in 2018-19, according to Financial Conduct Authority (FCA) data. This represents an increase of over 100,000 more retirees cashing out their pensions entirely compared to six years ago, before the Covid-19 pandemic.
Small Pots Most Affected
Two-thirds of the retirement nest eggs fully withdrawn in 2024-25 – totaling 301,991 plans – were worth less than £10,000. The rush of withdrawals has been attributed to concerns that the state pension will not cover basic retirement expenses. Adam Cole, from wealth management firm Quilter, commented: “Where savings are limited, taking the full amount is often a practical response to immediate financial pressures rather than a long-term income strategy.” He added: “The concern is that fully cashing out smaller pots may provide short-term relief but raises the risk of running out of money later in life.”
Tax Implications and Advice
Under government rules, most savers can take 25 per cent of their pension pot tax-free once they reach the age of 55, up to a maximum of £268,275. However, financial experts warn of the potential pitfalls of full withdrawals. Georgie Edwards, of workplace pension scheme provider TPT, described the rise as “a worrying signal” about retirement adequacy in Britain, stating: “For many, it’s not a strategic choice but a sign their savings aren’t sufficient.”
Tom Selby, of investment platform AJ Bell, advised: “Anyone considering cashing in their entire pension pot needs to think carefully about the tax consequences of that decision and the implications it could have for their retirement. Crucially, if you are taking money out of a pension and simply shoving it in a bank account, the money will be moving from an environment where it can grow tax-free to one where it could be subject to tax, while inflation will eat away at its real value over the long term.”
Structural Shift in Retirement Income
Mr Cole further noted: “The increase in pension withdrawals since 2018-19 reflects a structural shift as fewer people reach retirement with defined benefit income and more rely on defined contribution pots. That makes full or flexible access more likely.”
Government Response
A Department for Work and Pensions (DWP) spokesman responded: “The Pensions Commission is examining how we can ensure secure retirements for tomorrow’s pensioners, while our newly passed Pension Schemes Act will bring about major reform to the UK pensions system, benefitting millions of workers to the tune of up to £29,000 by the time they retire. Supporting pensioners is a priority and our commitment to the Triple Lock for the rest of this Parliament also means millions of pensioners will see their yearly State Pension rise by up to £2,100.”
