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Tax-free pension withdrawals: lump out or lump it?

Journalist: Hereward Mills, FT Adviser

ended 13. April 2026

Advisers, 

Yesterday (April 8), FT Adviser reported that 116,100 people aged 55 withdrew a total of £2.3bn in 2024/25.

https://www.ftadviser.com/content/0d48ea0e-eaaa-48b4-b7d8-d154c0faceca

This comes as pensions are set to be included in estates for inheritance tax purposes from April 2027.

Age 55 is the earliest point at which people can take up to 25 per cent as a tax-free lump sum (capped at £268,275).

My questions to financial advisers are: 

  • Have you seen an increase in tax-free lump sum withdrawals, particularly among clients aged 55 or just above?
  • What have you advised clients who wanted to take some or all of their 25 per cent allowance?
  • Have any clients proceeded with withdrawals despite your advice?

Thanks for the comments. 

Hereward 

3 responses from the Newspage community

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Editor
Samuel Mather-HolgateVerified
Managing Director & IFA at Mather and Murray Financial
Those wealthy pensioners who were using their retirement pots as an IHT vehicle to pass on their wealth have wised up to the fact this is not possible anymore. More and more members are opting to withdraw their tax free cash and spent it or gift it away to make a dent in their estate. From here on in, a pension will be used as a method of providing income in retirement.
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Ross LaceyVerified
Director & Independent Financial Adviser at Fairview Financial Management
We tend to recommend phasing tax free cash withdrawals to optimise our clients' tax positions.

However, there are circumstances where taking the full lump at outset can make more sense.

Where someone is at or close to the maximum lump sum allowance, we can get the lump sum out in full, and then redeploy it across ISAs and an investment account / bond. This can leave them in a better tax position overall.

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Adam Pickett0
Independent Financial Adviser at McLaren Capital
We did see an increase in withdrawals from pensions, which was largely driven by speculation regarding what the government might do at the last two autumn budgets. Fortunately, our clients largely heeded our advice and only took funds when it was right for them to do so. Having said that, we are also advising on more withdrawals, particularly when clients have surpassed their tax free cash cap. With the change in inheritance tax rules, keeping funds in pensions beyond this point is becoming more punishing, especially if there is a better use for the tax free cash lump sum, but as with everything, the right thing to do has to be determined on a client by client basis.