Nearly 400 pensioners have been hit with tax bills of up to £100,000 after withdrawing their entire pension pots, according to new data from HMRC. The bills come as savers rushed to access their funds before planned inheritance tax changes announced by Chancellor Rachel Reeves, who is widely expected to be replaced by Birmingham MP Shabana Mahmood.
£100,000 Tax Bills for 400 Savers
Between October 2024 and March 2025, 400 taxpayers paid at least £98,700 to HMRC after emptying pension pots worth at least £250,000. The rush was triggered by Reeves's announcement that unspent pension wealth would be brought into the inheritance tax net from April 2027.
Expert Warnings on Early Withdrawals
Mike Ambery of Standard Life said: “Tax is becoming an increasingly important part of how people think about their pensions, particularly as inheritance tax changes loom. For some, this prospect may lead to decisions about accessing their savings earlier than they otherwise would have.” He added that fully withdrawing means savers may also lose out on potential investment returns.
Tom Selby of AJ Bell commented: “There will be a natural growth in the number of people in drawdown each year as an ageing population reaches retirement. Failure to give people certainty over tax-free cash has been a problem ahead of the last two Budgets and will be again this year if Andy Burnham’s chancellor doesn’t get a grip early and commit to long-term pensions tax stability.”
Advice on Spreading Withdrawals
Sir Steve Webb, former pension minister and now of consultancy LCP, advised: “It is very important that those considering taking out large pots, often painstakingly built up over decades, do so carefully and ideally based on expert financial advice. Even spreading a withdrawal across two financial years can significantly reduce the overall tax bill.”
A Treasury spokesman said: “How and when pension savings are accessed is a personal financial decision, and people can already take up to 25% of their pension tax-free up to a maximum £268,275.”
