The pensions industry has voiced its concerns over the surge in pension withdrawals revealed in the Financial Conduct Authority’s (FCA) latest Retirement Income Market Data analysis.

The total value of withdrawals from pension pots increased by 21.7 per cent to £91.2bn in the year ending 31 March 2026, and has risen from £53.6bn in 2023/24, a 70 per cent increase over two years.

This increase in pension withdrawals over the past two years amid uncertainty around pension and tax policy was “very worrying”, said LCP partner, Steve Webb.

LCP noted that, over that two-year period, additional withdrawals were driven by speculation around a cap on tax-free cash ahead of the 2024 and 2025 Budgets, and the introduction of inheritance tax (IHT) on pensions at the 2024 Budget, which is coming into force in April 2027.

“It is very worrying that uncertainties about government policy on tax and pensions seems to have driven very high levels of withdrawals from pension pots,” Webb stated.

“The speculation around caps on tax free cash was unfounded, but this did not prevent people from rushing to access their pensions, potentially losing out on further investment returns as a result.

“And the imposition of IHT is a very real change which is already affecting people’s retirement planning.”

Webb argued that a period of stability in government tax policy was desperately needed, as continuing uncertainty was destabilising and distorted people’s financial planning.

AJ Bell head of public policy, Rachel Vahey, echoed these concerns, noting that while more people having defined contribution (DC) pots was a factor, the worry was that people were not making decisions based on what was best, but due to concerns about rumours of changes to pension tax incentives or tax rules.

“Unless people make decisions based on their long-term retirement strategy, they could find themselves in later life having to rely on a much smaller retirement income than they wanted or anticipated,” she said.

Broadstone head of workplace savings, Damon Hopkins, said that the scale of the increase suggested that changing behaviours and decisions were playing an important role.

“Recent changes to IHT rules may be influencing how people think about their pension savings, with some retirees reassessing the balance between preserving pension wealth for future generations and using those assets to support their own retirement,” he added.

“At the same time, the rise in annuity purchases shows that certainty remains highly valued.

“After years where flexibility was the dominant focus, more people are now considering how guaranteed income can provide greater confidence and stability throughout retirement, especially as rates have risen markedly in recent times.”

Lumera commercial director of data and dashboards, Maurice Titley, said that, as more people reach retirement with DC savings, initiatives such as Guided Retirement and Targeted Support were likely to play an important role in supporting savers to achieve better outcomes.

“However, both initiatives will require providers to be able to leverage data at scale, whether that is to assign members to appropriate default pathways or provide more targeted guidance at the point they access their pension,” he added.

“As the retirement landscape becomes more complex, providers will need the technology and data infrastructure to deliver this support consistently and at scale.”

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