The number of pension pots fully cashed in rose by 105,038 in the 2024–25 tax year compared with seven years ago, increasing the risk of higher tax bills, TPT Retirement Solutions has found.

According to data released by the Financial Conduct Authority (FCA), 357,122 pension plans were fully withdrawn in 2018-19, compared with 462,160 in 2024-25, representing a 29 per cent increase.

TPT warned that because full withdrawals were taxed as income, individuals could get pushed into a higher tax bracket, highlighting the need for better guidance for pension savers.

The firm said the rise in full pension withdrawals suggested many savers are retiring with pots too small to generate meaningful income through drawdown.

More than 300,000 pots fully withdrawn in 2024-25 were worth less than £10,000, while a further 112,526 were valued between £10,000 and £29,000.

FCA figures also showed an increase in partial withdrawals, rising from 163,335 in 2018-19 to 328,419 in the last data set, which the firm said could also have tax implications.

TPT Retirement Solutions DC proposition associate director, Georgie Edwards, said the rise in people cashing in their pensions in full was 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,” Edwards warned, “and some may also be reluctant to consolidate pots, missing the chance to build a more sustainable income”.

“In some cases, savers are stuck in legacy products that don’t offer flexible options like phased drawdown or regular UFPLS (Uncrystallised Funds Pension Lump Sum), effectively forcing higher withdrawals than they’d prefer and increasing their tax exposure,” she added.

Edwards explained that full withdrawals, taxed as income, often pushed people into higher tax brackets “unnecessarily”.

She highlighted the need for better guidance to help retirees avoid eroding their savings or overpaying taxes.

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