A growing number of state pensioners born before 1971 are choosing to fully withdraw their pension pots upon retirement, with data showing a notable jump in such actions. In 2024-25 alone, 462,160 pension pots were fully cashed out when first accessed—a 29% increase from 357,122 in 2018-19, according to the Financial Conduct Authority (FCA).
Strikingly, two-thirds of these withdrawals—301,991 pots—were valued at less than £10,000. Experts suggest that this surge reflects concerns that the state pension may not suffice to cover basic living expenses in retirement.
Adam Cole from Quilter highlights the trend: “Where savings are limited, taking the full amount is often a practical response to immediate financial pressures rather than a sustainable income strategy. While it may offer short-term relief, fully cashing out smaller pots increases the risk of depleting funds later in life.”
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Currently, UK government rules allow savers to withdraw 25% of their pension pot tax-free from age 55, with a maximum threshold of £268,275.
Georgie Edwards of pension provider TPT describes the rise in full withdrawals as “a worrying signal about retirement adequacy in Britain,” noting that for many, this is less a strategic decision and more a reflection of insufficient savings.
Tom Selby from AJ Bell warns about potential pitfalls: “Cashing in an entire pension pot requires careful consideration of tax consequences and longer-term retirement implications. Moving funds from a tax-advantaged pension into a bank account exposes the money to taxation and inflation, eroding its real value over time.”
Adam Cole further explains the broader shift: “The increase in pension withdrawals since 2018-19 corresponds with fewer retirees having defined benefit pensions and greater reliance on defined contribution pots, making full or flexible withdrawals more common.”
A Department for Work and Pensions (DWP) spokesperson added: “The Pensions Commission is working to ensure secure retirements for future pensioners. Our recent Pension Schemes Act will bring major reforms, potentially benefiting workers with up to £29,000 by retirement. Supporting pensioners remains a top priority, and ongoing Triple Lock commitments mean millions will see annual State Pension rises of up to £2,100.”