A total of £75.5bn has been withdrawn as taxable flexible pension payments by savers under the age of 65 since the introduction of pension freedoms in 2015, new analysis from Lumera has revealed.

The research, based on HMRC data, found that 2.4 million people first accessed a taxable pension payment before reaching 65, accounting for 70 per cent of all pension savers who have taken taxable withdrawals.

Since 2015, a total of £124.7bn has been withdrawn from pensions as taxable flexible payments, with £75.5bn (61 per cent) going to individuals who were under 65 at the time of payment.

These payments do not include the tax-free lump sum – illustrating the scale of early access to retirement savings.

The number of under-65s taking a taxable pension payment increased by 7 per cent to 644,000 between 2024/25 to 2025/26, while the value of payments rose from £10.3bn to £11.4bn.

While pension freedoms have given people more flexibility over their retirement savings, accessing a pension early can have “important and sometimes overlooked consequences,” explained Lumera chief commercial officer, Peter Roos.

Up to 25 per cent can usually be taken tax-free, but any further withdrawals are added to taxable income and may push savers into a higher tax band. Flexibly accessing taxable pension income can also trigger the Money Purchase Annual Allowance, reducing the annual tax-relievable defined contribution (DC) pension allowance from £60,000 to £10,000 for those continuing to work and save for retirement.

He continued: “The concern is not necessarily that people are accessing their pensions before 65 – for many, doing so will be entirely appropriate – but whether they fully understand the tax implications and the potential impact on their longer-term retirement income.

“Taking money out earlier also means losing the potential investment growth on those savings and leaving a smaller pot to support what could be several decades in retirement.

Roos continued that initiatives such as Guided Retirement and Targeted Support could play an important role in supporting savers with DC pensions.

He said: “Both of these initiatives will require providers to be able to leverage data at scale, whether it is to assign members to default pathways, or to provide more targeted guidance at the point they access their pension. This can also help savers avoid unintended tax consequences and make choices that are better aligned with their long-term retirement needs.”

Lumera’s analysis also uncovered a gender-divide, with men having withdrawn £94.19bn – triple that of women.

Loos added: “This is likely to reflect, at least in part, wider differences in pension wealth and retirement savings between men and women, and underlines the importance of ensuring support works for people with very different financial circumstances.”

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