The total value of withdrawals from pension pots increased by 21.7 per cent to £91.2bn in the year ending 31 March 2026, with annuity purchases and those entering drawdown both rising, data from the Financial Conduct Authority (FCA) has revealed.

Its Retirement Income Market Data 2025/26 showed the value withdrawn from pensions rose from £75bn in 2024/25, and from £52.2bn in 2023/24, representing a 75 per cent increase over two years.

The data also highlighted an increase in the number of higher value pots being accessed, with 8.6 per cent of pots accessed having a value of £250,000 or more, up from 7.2 per cent in 2024/25 and 4.8 per cent in 2023/24.

The number of pots accessed for the first time increased by 7.4 per cent to 1.05 million in 2025/26.

The value of tax-free lump sums taken from pensions also continued to rise, increasing by more than a fifth to £22.1bn in 2025/26, following a 63 per cent increase in 2024/25.

Schemes entering drawdown rose by 10.5 per cent to 401,137, with 64.5 per cent taking the tax-free pension commencement lump sum, up from 61.9 per cent in 2024/25.

Meanwhile, annuity purchases also increased over the year, rising by 13.2 per cent to 100,144.

The proportion of pots accessed through full encashment fell from 47.4 per cent in 2024/25 to 45.8 per cent in 2025/26.

Despite the fall, full encashment remained the most popular way of accessing a pension pot, with 479,485 pensions fully withdrawn at first access, although the majority were worth less than £10,000.

A total of 320,762 schemes were accessed at an annual rate of withdrawal of 8 per cent or more, accounting for 46 per cent of the total number of pensions where regular withdrawals were made.

This was up from 259,507 in 2024/25, an increase of 24 per cent, and Broadstone head of policy, David Brooks, warned that this would raise questions around long-term sustainability.

“For some retirees, particularly those relying heavily on defined contribution savings to fund retirement, withdrawal rates at this level may increase the risk of exhausting their pension pot earlier than expected,” Brooks stated.

“However, this data only tells us how much is being withdrawn, not whether those withdrawals are appropriate.

“Some retirees will have other sources of income or wealth, while others may be deliberately drawing down pension savings over a shorter period rather than planning for a retirement lasting several decades.”

Nucleus technical services director, Andrew Tully, noted that the increase in the number of people accessing their pensions likely reflected the government’s moves to include pensions within inheritance tax (IHT) and speculation about tax-free lump sums ahead of last year's Budget.

“This has caused many people to access tax-free cash and income, potentially to gift to family or shelter from IHT,” he continued.

“It’s clear the changes will also drive behaviour and that is demonstrated by the significant increase in people accessing larger pots - with people likely to withdraw more from pensions at younger ages and either spend, gift or shelter these increased withdrawals.

“This reinforces the fact that continuous ongoing policy changes drive poor customer outcomes and instead we need a pensions system that is consistent, stable and encourages long-term saving.

“While it may be unwise for people to act purely as a result of speculation, the lack of stability and the regular changes which people have witnessed helps drive this type of poor behaviour.”

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