More than 221 people fully withdrew a pension pot of £250,000 or more between October 2022 and March 2023, resulting in a minimum tax bill of £97,500 each, according to new analysis of Financial Conduct Authority (FCA) figures by Standard Life.

The analysis of the FCA retirement income market data showed that, in the same period, 1,537 people taking a pension pot between £100,000 and £249,000 fully in cash, resulting in a minimum £27,400 tax bill for each person.

Furthermore, it found that someone fully withdrawing a pension pot of £174,500, a mid-point of that range, would now pay a minimum of £64,700 in tax compared to paying £63,500 in 2022 to 2023.

Meanwhile, following the reduction of the 45p rate of tax from £150,000 to £125,140 from April 2023 even more tax would be payable, with a pension pot of £250,000 withdrawn in the current tax year resulting in a tax bill of at least £98,700, over £1,000 more.

Standard Life explained that these figures only take a pension into account, warning that people with other sources of income at the time of withdrawal would pay even more tax.

Standard Life retirement savings director, Mike Ambery, said: “Our analysis shows there are hundreds of people out there paying huge amounts of tax to access their pension.

"It’s impossible to know whether their individual circumstances warranted them taking such a big tax hit but for the vast majority of people it’s something you’ll want to avoid."

Given this, Ambery stated that it’s “important” to remember most pension income is eligible for tax and that taking a large pot fully in cash will result in a “very large tax bill” possibly taking away many years’ worth of savings.

“Often when people fully withdraw their pension it is simply to move the money to their bank account. Not only does this mean their savings become eligible for tax but it also means they’re potentially giving up investment returns,” he stated.

“The good news is there are ways to make withdrawing your retirement savings more tax efficient and it’s possible to spread your withdrawals over many years which can be more efficient.

“Be sure to speak to your pension provider about your options, and we’d strongly recommend seeking advice or guidance when taking your pension.”

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