More than three fifths (61 per cent) of retirees who withdrew tax-free cash from their pension pots ahead of the Budget last year regret doing so, research from Quilter has shown.

Its survey of 5,000 UK retirees found that 57 per cent withdrew tax-free pension cash ahead of the Budget, with 41 per cent of those doing so in anticipation of potential rule changes.

In the build up to last year’s Budget, there was widespread speculation that the 25 per cent tax-free lump sum could be reduced or capped.

Quilter said that while no formal proposal was presented, the lack of early clarity meant that rumours persisted, creating uncertainty for retirees and those approaching retirement.

It noted that many retirees appeared to have interpreted the lack of clarity as a sign that a change to pensions tax-free cash was imminent, prompting pre-emptive withdrawals to lock in existing rules.

When asked about how they used their tax-free cash, 15 per cent spent it on renovations or home improvements, while the same proportion used it to cover healthcare or other costs.

Around one in seven (14 per cent) gifted it to grandchildren or great-grandchildren or put it towards their education, while the same proportion used it to meet day-to-day living costs.

“This data shows how speculation ahead of last year’s budget led many retirees to act out of fear of losing what is a vital component of their retirement provision rather than genuine need at that moment,” commented Quilter head of retirement policy, Jon Greer.

“The fact so many regret doing so highlights the real harm that can come from making decisions driven by rumour.

“This research underlines just how sensitive retirement planning has become to continuous budget speculation.

“Those saving towards and planning their retirement need and deserve certainty, and there should be a clear commitment to avoid another prolonged period of speculation ahead of future budgets.”

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