Over 100,000 more pensioners are cashing in their entire pensions now than seven years ago, according to new analysis by TPT Retirement Solutions based on data published annually by the Financial Conduct Authority (FCA). The number of people fully withdrawing their pension pots at first access has risen by 29% since records began in the 2018/19 tax year, meaning 462,160 savers emptied their pots in 2024/25 alone.
The scale of the surge
The data shows a steady upward trend. In 2018/19 there were 357,122 full withdrawals; by 2023/24 that had climbed to 469,723, before a slight dip to 462,160 last year. The overall rise represents 105,038 more individuals turning their entire retirement savings into cash in a single go.
Partial “ad hoc” withdrawals have also ballooned, more than doubling over the same period. The number of pension plans from which an ad hoc partial withdrawal was made rose from 163,335 in 2018/19 to 328,419 in 2024/25 – a 101% increase that also carries significant tax consequences. In total, savers withdrew £70.9 billion from pensions in 2024/25, up 36% from £52.2 billion the previous year, according to the FCA figures.
The trend is particularly marked among older retirees. Between 2018 and 2025 the number of 65 to 74-year-olds fully cashing in their pensions rose by 75%. For those aged 55 to 64 the increase was a more modest 15%.
The heavy tax cost of cashing out in full
The most significant risk facing anyone who empties their pension pot in one go is the income tax bill, which can be far larger than many anticipate. Under current rules, 25% of the pot can usually be taken tax-free, but the remaining 75% is treated as ordinary income in the year of withdrawal.
This means the entire sum is added to the saver’s other income for that tax year, which can push them into a higher or additional rate band. Someone who already earns £50,000 and withdraws a £100,000 pot, for example, would see the taxable £75,000 added to their salary, propelling them deep into the 40% higher rate. Even more punishing is the so-called “60% tax trap”, which applies when income falls between £100,000 and £125,140. In that bracket the personal allowance is gradually withdrawn, creating an effective marginal rate of 60% for every pound earned. A pension withdrawal of even moderate size could tip a retiree into this zone, meaning a huge slice of their hard-earned savings goes straight to the taxman.
Beyond the immediate shock of a single-year tax bill, there are longer-term consequences. Money left inside a pension continues to grow in a tax-advantaged environment. Once withdrawn, any portion not moved into other wrappers such as ISAs becomes exposed to income tax, dividend tax or capital gains tax over time. Ian Futcher, a financial planner at Quilter, warned: “Large one-off withdrawals will often leave at least part of the money outside those protections and potentially exposed to these taxes.”
The inheritance tax landscape is also shifting. From April 2027, unused pension funds will be included in an individual’s estate for inheritance tax purposes. This could bring more estates into the IHT net, potentially triggering a 40% charge on pension wealth above the nil-rate band. Beneficiaries could face a double hit: inheritance tax on the pension pot and then income tax on withdrawals made after age 75. Futcher cautioned that emptying pension pots early is not necessarily the right response. “Keeping funds within a pension can still offer valuable tax efficiency and long-term planning flexibility,” he said, noting that those concerned about passing on wealth should consider alternatives such as gifting from surplus income.
Why so many are pulling the plug
The rise in full pension withdrawals points to a deeper problem: many people simply do not have enough saved to make drawdown worthwhile. In 2024/25 more than 300,000 of the pots cashed out were worth less than £10,000, and a further 112,526 fell between £10,000 and £29,000. With sums that small, the option of taking a regular income through phased withdrawals is unattractive or impractical.
Georgie Edwards from TPT Retirement Solutions said the data “highlights the need for better guidance so retirees don’t erode their savings – or pay more tax than they need to”. She added: “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.”
The inadequacy of typical savings is underlined by the Pensions and Lifetime Savings Association’s retirement living standards. For a single person, a “minimum” retirement requires £14,400 a year, a “moderate” standard £31,300, and a “comfortable” one £43,100 – yet only 16.1% of households are on track for a comfortable retirement, according to the research. Average pension pot sizes vary widely. While one measure puts the average at £21,875 as of July 2025, another cites a median of £101,700 for Great Britain. For those aged 55 to 64 the typical pot is £137,800, which after basic bills equates to roughly £22 a day for other expenses. Gender and regional disparities are stark: men hold a median of £75,700 compared with £42,500 for women, while the South East has the highest median pot at £137,200 and the North West the lowest at £86,500.
Inflation has also eroded the real value of many pots, and while the state pension is protected by the triple lock, private pensions have no such guarantee. For those already in drawdown, fixed withdrawals buy less every year. High inflation can also reduce transfer values for defined benefit schemes.
Another factor forcing people into full withdrawals is the nature of the pension product itself. Edwards noted that some savers are “stuck in legacy products that don’t offer flexible options like phased drawdown or regular uncrystallised funds pension lump sum, effectively forcing higher withdrawals than they’d prefer and increasing their tax exposure”.
The government offers free impartial guidance through Pension Wise, and experts recommend consulting an authorised financial adviser before making any irreversible decision. But as the FCA’s data makes clear, hundreds of thousands of retirees each year are choosing – or being forced – to take the full cash option, often with little sense of the tax bill that awaits.
