New figures from the FCA published today have revealed that the total number of pension plans accessed for the first time rose by 8.6% to 961,575 compared to 885,455 in 2023/24.
The figures were included in the regulator’s latest retirement income data for 2024/25.
In particular the figures revealed a surge in people accessing pension pots worth more than a quarter of a million pounds.
The number went up in the six months between April 2024 and September 2024, coinciding with fears that the first Budget of the new Labour government would include measures such as capping or scrapping tax-free lump sums.
But the number went up again in October 2024-March 2025, in response to the Budget announcement that pensions would be included in the IHT net from April 2027.
In total, more than £53bn was taken out over the year in cases where pension pots were moved into drawdown but not fully emptied out.
Steve Webb, partner at pensions consultants LCP, said: “These figures show graphically how uncertainty about pensions and tax can move the market.
“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.”
Jon Greer, head of retirement policy at Quilter, said: “The continued growth highlights 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. But 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.”
The value taken from pension pots overall leapt by more than a third, rising 35.9% from £52.2bn in 2023/24 to £70.9bn in 2024/25. Drawdown products saw the largest increase in uptake, with sales climbing 25.5% to 349,992, cementing their position as the dominant choice for retirement income.
Mr Greer said: “While flexibility remains attractive, it also exposes retirees to the risk of depleting their savings too quickly if withdrawals are not carefully managed.”
Annuities continued their modest revival with sales up 7.8% to 88,430. Mr Greer said: “Higher interest rates have made annuities more competitive, and while volumes remain far below their pre-pension freedoms peak, more people are starting to recognise the value of securing a guaranteed income in retirement.”
Pension providers have been urged to find out more about post-retirement spending as new research suggests homeowners’ and renters’ drawdown habits are very different.
The restricted remit of the new Pensions Commission will limit its ability to deal with the scale of the problem, according to LCP partner and former Pensions Minister Steve Webb.
