‘Fears over Budget tax changes and new pensions IHT rules lead to surge in people accessing the biggest pension pots’ – Steve Webb, LCP

New figures out today from the FCA show that in the 12 months to March 2025, there was a surge in people accessing pension pots worth more than a quarter of a million pounds. The number went up in the six months between April 2024 and September 2024, coinciding with fears that the first Budget of the new Labour government would include measures such as capping or scrapping tax-free lump sums. However, the number went up again in October 2024-March 2025, clearly in response to the Budget announcement that pensions would be included in the IHT net from April 2027. In total, over £53 billion was taken out over the year in cases where pension pots were moved into drawdown but not fully emptied out.

The table and graph below show the number of pots over £250,000 accessed in each six month period and taken into drawdown but not fully withdrawn:

Commenting, Steve Webb, Partner at LCP, said:

“These figures show graphically how uncertainty about pensions and tax can move the market. In the six months before the October 2024 Budget, there was a surge in larger pension pots being accessed, mainly because of fears about reductions in limits on tax-free cash.

“But after the Budget, where there was no change to tax-free cash, withdrawals of large pots accelerated. This is likely to reflect the change in pensions and IHT, with people starting to explore ways of moving money out of the IHT net ahead of the 2027 changes. Given that pensions should be a long-term business, it is deeply disappointing that consumer behaviour is being driven so profoundly by uncertainty around public policy.”