There has been a significant increase in the amount of money being withdrawn from pensions, with a particular "surge" seen in those accessing large pension pots, the latest Retirement Income Market Data from the Financial Conduct Authority (FCA) has revealed.  
The figures showed that the amount of money withdrawn from pensions had risen by 35.9 per cent over the past year, increasing from £52.152bn in 2023/24 to £70.896bn in 2024/25.

The number of pension plans accessed for the first time has also increased again, coming in around 8.6 per cent higher than last year at 961,575.

Quilter head of retirement, Jon Greer, highlighted this continued growth as evidence of how more people are leaning on their pensions earlier, often to meet rising living costs and fill income gaps elsewhere.

"Some of the increase will also reflect the demographic bulge of baby boomers reaching retirement age, so part of the rise is structural and will naturally continue in the years ahead," he pointed out.

However, Evelyn Partners' retirement specialist, Andrew King, pointed out that while some year-on-year increases are expected given the ageing population, this year's increase is "substantially greater" than in previous years.

LCP also pointed out that a particular "surge" in activity was seen in the number of people accessing pension pots worth more than £250,000.

According to the FCA's data, large pension pots accessed and taken into drawdown without being fully withdrawn increased from 34,832 between April 2023 and March 2024 to 58,544 between April 2024 and March 2025, a 68 per cent increase.

LCP noted that the increase in the six months between April and September 2024 coincided with fears that the first Budget under the new Labour government would increase measures such as capping or scrapping tax-free lump sums.

It also pointed out that this figure increased further in October 2024 to March 2025, likely in response to the Budget announcement that pensions would come into scope of inheritance tax (IHT) from April 2027.

“These figures show graphically how uncertainty about pensions and tax can move the market,” commented LCP partner, Steve Webb.

“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.”

King agreed, arguing that "as it seems the Treasury is unable or unwilling to put such rumours to bed, you can only assume the increase in pension withdrawals is going on as we speak".

"Certainly at Evelyn Partners we’re having conversations with clients about the wisdom or otherwise of drawing down more heavily from their pensions or taking their 25 per cent tax-free cash."

The impact of speculation over future pension changes has also been seen in broader trends, as sales of drawdown policies saw the biggest increase (25.5 per cent), rising from 278,977 in 2023/24 to 349,992 in 2024/25.

Nucleus technical services director, Andrew Tully, pointed out that, "given the ongoing freezing of the tax thresholds, being able to vary income to ensure it is taken as tax efficiently as possible is a key benefit".

However, he warned that the number of people accessing drawdown without taking advice or guidance is concerning, with 45 per cent failing to take advice before entering drawdown.

This was also highlighted as a broader concern, as the FCA found that less than a third (30.6 per cent) of people sought regulated advice before accessing their pension.

"The complexity of retirement planning can’t be overstated. People approaching or thinking about retirement income need informed, impartial input which considers their personal circumstances," Tully stated.

"As well as the many product, technical and tax considerations. That’s why regulated financial advice is so important."

Just Group group communications director, Stephen Lowe, agreed: "Perhaps most worrying is that use of professional help such as regulated advice or even the free, independent and impartial Pension Wise service is continuing to slip.

"Accessing pensions is a major life decision and it is concerning so many are doing it with no formal support.”

Lowe also pointed out that the proportion taking high – some would say unsustainable – levels of income from their drawdown pots has also increased, as 53 per cent of pots are paying out income rates of more than 8 per cent of their value, compared to 48 per cent paying out that level of income last year.
 
"The real concern is the scale of withdrawals and the lack of advice that accompanies them, which risks leaving many without adequate income later in life," Greer agreed.

"With nearly seven in ten making complex decisions without professional help, there is a real risk of retirees taking unsustainable withdrawals or making choices that could undermine their long-term financial security," he continued.

“This is exactly where reforms to deliver simplified advice and targeted support can make a difference, giving people accessible, timely guidance that steers them towards more sustainable decisions without forcing them into a full advice process if they don’t need it."

These concerns were also echoed by Standard Life head of annuities, Pete Cowell, who said that, in particular, the 24 per cent increase in the number of individuals with pot sizes over £100,000 making regular partial withdrawals of 8 per cent or more from 2023/24 – 2024/25 raises concerns.

"Standard Life analysis has indicated annual withdrawals of 8 per cent from a £100,000 pot could exhaust savings in as little as 12 years or as long as 28 years, depending on investment growth," he continued.

"While people may have other sources of income in retirement, monitoring the balance between withdrawals, investment returns, while ensuring essential income needs are met throughout retirement, has never been more critical.”

The number of annuity sales was also on the rise, increasing by 7.88 per cent from 82,061 in 2023/24 to 88,430.

However, when viewed as a percentage of the overall number of customers accessing their pension, annuity sales remained consistent at 9 per cent.

In addition to this, the FCA found that the number of transfers out of defined benefit schemes continued to decline.

In 2024/25, 6,418 took place, down from last year’s figure of 7,181 and representing a "fraction" of the 56,990 which transferred in 2018/19.

“Rising gilt yields will have had a negative impact on transfer values making a transfer less attractive for those with DB pensions. Another factor will have been regulatory change which has led to a large fall in the number of advisers willing to participate in this area," Broadstone head of redress, Brian Nimmo, explained.

“While a transfer may not be in the interests of many DB pensioners, in certain circumstances there will be occasions where it could make good sense. The question remains whether we have now seen an over-retraction in the market which is limiting access to good advice for those with genuine reasons to explore a transfer.”

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