British pension savers withdrew a record £22.4 billion from their pots during the last tax year, according to new figures published by HM Revenue and Customs.
In the first quarter of 2026 alone, taxable withdrawals rose 18 percent compared with the same period a year earlier, reaching £5.9 billion. The average payout was £7,700, and the number of people drawing cash jumped 15 percent to 770,000.
The HMRC figures cover only taxable withdrawals. How many people accessed their 25 percent tax-free allowance is not fully captured because reporting that to the tax authority is optional for pension schemes.
Pension experts said the rise reflects both a growing number of people reaching retirement with defined contribution pots and pressure from the cost of living. For wealthier savers, another driver is the Government's plan to bring pension pots into scope for inheritance tax from spring 2027. Many people who had intended to pass retirement savings to the next generation free of the 40 percent levy are now drawing down or gifting money ahead of the change.
A separate rush to access tax-free cash was recorded last summer and autumn, driven by speculation about a raid in the Autumn Budget that ultimately did not happen.
David Brooks, head of policy at pensions consultancy Broadstone, said the pace of growth is cause for concern. "The continued growth in taxable pension withdrawals is to be expected given the growing number of people reaching retirement with defined contribution pension pots," he said. "However, the 18 per cent annual increase in the value withdrawn during the first quarter of 2026 compared to the previous year is striking and suggests that financial pressures may be encouraging savers to access more of their pensions."
Brooks added that "pension freedoms provide valuable flexibility but inevitably increase the risk that savings are depleted too quickly, particularly where people underestimate how long their retirement may last."
Maurice Titley, commercial director at pension services firm Lumera, warned that not all withdrawals are well-planned. "While some people will be accessing their pots as part of a carefully planned retirement strategy, others may not fully consider the longer-term impact on their retirement income," he said. "There is also a potential tax trap - taking a large sum in one go can push someone into a higher tax band, leaving them with an unexpectedly large tax bill."
Cost of relief to government keeps rising
The HMRC figures also showed the net cost to the Government of pension tax relief is growing. Tax relief and National Insurance top-ups to pensions reached £53.8 billion in 2024-2025, up from £53.4 billion the prior year. When payments to employers are included, the total bill rose by nearly £5 billion to £83.9 billion.
Steve Webb, a partner at pensions consultant LCP, attributed part of the rise to frozen tax thresholds. "The constant freezing of tax thresholds and allowances has dragged millions more people into paying higher rates of income tax," he said. "The flip side of this is that when they pay into a pension they get more tax relief, leading the cost of tax relief to soar. But frozen personal allowances mean that the number of pensioners paying income tax has also risen steeply, and the tax bill on pensioners is up dramatically."
Webb said a Government move to cut pension tax relief was unlikely in the near term. "Any change would be complex and technical and could take years to implement. It would deliver little money this side of the next election but would be hugely politically unpopular," he said. "The Government may well conclude that it simply has to live with the rising cost of tax relief for now."
Overall pension saving remains solid
Separate figures from the Department for Work and Pensions showed around eight in ten employees were saving into pensions in 2025. Total annual workplace pension savings reached £166.1 billion, which the DWP said represents a £63.5 billion increase compared with 2012, calculated in 2025 earnings terms.
Private pension savings rose to £15.9 billion in 2024-2025, up from £14.6 billion the year before. From April 2029, contributions through salary sacrifice schemes that attract a tax benefit will be capped at £2,000 per year.
