Savers are sounding the alarm over potential tax hikes in the upcoming Autumn Budget, after £18 billion was withdrawn from UK pension pots in the last financial year. 

Figures from the Financial Conduct Authority reveal that as much as £18.08 billion has been withdrawn from pension pots in the United Kingdom, which is a staggering 60% more than the previous year. 

In fact, in the six months leading up to April 2025, withdrawals eclipsed £10 billion, which is over 70% higher than the figure for the same time period a year prior, further underlining this alarming anomaly.

It is a move that could be related to fears around fiscal rule changes in the upcoming Budget announcement by the Chancellor, Rachel Reeves in November, with suggestions that a cap could be introduced on how much of a pension pot can be withdrawn tax-free.

Current rules state that you can withdraw up to 25% of your pension, without it being taxed, once you are ready for retirement. This is often done to pay off any outstanding debts or mortgages before setting yourself up for the remainder of your life with the rest of your pension pot. 

While there are no concrete plans to change this at present, there has been a refusal to rule it out by the Chancellor, which is believed to be behind a scramble to withdraw pension fund money before any additional taxes are potentially rolled out.

Should you be worried?

Our estimation is no, but that doesn’t mean it’s not an understandable cause for concern for some savers. 

Changes to these pension withdrawals would have pretty severe implications for a number of public sector workers, and we would advise against making the decision to preemptively take money out of your pension pot without plenty of forward planning and preparation. Your pension is set up and in place to best prepare you for the latter years of your life during retirement, and it is important to keep a healthy amount in the pot for a rainy day.

Another potential reason for savers withdrawing funds from pension pots could be the changes to inheritance tax rules, which will see unused pensions become subject to inheritance tax payments. However, this announced change will only come into action from April 2027, but that hasn’t stopped people from possibly withdrawing funds and gifting them to loved ones as a matter of urgency, in order to get ahead of the game.

For now, though, it is a case of all eyes being on the Chancellor ahead of her upcoming Budget announcement late in November. Until that point, most of what is heard around financial plans for the UK will be a product of speculation and forecast, rather than concrete evidence.

Should clients have any worries around specific payments with this money, such as mortgage repayments, everyone here at Matthew Douglas is more than happy to assist. Contact us today to find out how we can help with your financial situation or stresses: www.matthewdouglas.co.uk/contact/