Pension withdrawals surge ahead of Budget: Why you should hesitate before joining in

Savers withdrew a record £91.2 billion from their pension pots in the year to March 2026, as concerns about possible changes to pension tax rules added to uncertainty over retirement savings.

The figure represents a 21.7% increase on the previous year, according to the Financial Conduct Authority (FCA) — equivalent to around £250 million being withdrawn every day.

More than 1.05 million pension pots were accessed for the first time during the year, up 7.4% on the previous year. Almost half were fully cashed in, although many of these were relatively small pots. Meanwhile, around seven in ten pots were accessed without regulated financial advice.

The figures come amid speculation about whether the Chancellor will change the tax treatment of pensions in the Budget. Some savers may be considering taking money out now in case the rules become less generous.

However, the government has given no indication that it will change the pension tax-free allowance at tomorrow’s Budget. In fact, Pensions Minister Torsten Bell, recently called the rumours “garbage”.

Under current rules, eligible savers can usually take up to 25% of their pension pot tax-free, subject to a standard lifetime limit of £268,275. The rest is generally taxable when withdrawn, depending on the type of pension and how the money is taken.

But taking money out simply because you fear the rules might change can have unintended consequences. Once withdrawn, money may lose the tax advantages it enjoyed inside your pension, and investing or saving it elsewhere could create different tax implications.

There can also be unexpected tax bills. HMRC repaid around £50.4 million in overpaid tax relating to flexible pension withdrawals between April and June 2026. This can happen when tax is initially deducted using an emergency rate, meaning some people need to claim a refund.

What should you do right now?

Don’t make rushed decisions based on Budget rumours. Until the Chancellor announces specific measures, nobody can say for certain what will change or who will be affected.

If you’re worried about possible changes, an independent financial adviser can help you understand your options and whether any action is appropriate for your circumstances.