Pension industry leaders have warned Chancellor Healey to act decisively against unchecked speculation over pension taxation ahead of his maiden Autumn Budget.
New figures from the Financial Conduct Authority reveal UK savers pulled £91bn from pension pots before last year’s Autumn Budget as they sought to avoid a feared Labour tax raid.
Withdrawals grew by £16bn in the 2025/26 tax year compared to the prior year, representing a sharp acceleration in the pace of pension pot access.
The total amount pulled from pension funds jumped from £53bn to £91bn over the last two years, marking an increase of 70 per cent across that period.
AJ Bell attributed the surge to growing fears among savers of a cap on tax-free cash, alongside government plans to bring pensions into the scope of inheritance tax from April 2027.
Michael Summersgill, chief executive of AJ Bell, said: “These figures should end any doubt about the real world consequences of allowing pension tax speculation to run unchecked… just as pension providers warned.”
Summersgill added: “A Chancellor focused on putting households on sound financial footing and boosting growth should see this as an open goal. Confirming pension tax stability would solve the problem overnight without a penny of new Treasury spending, while clearly signalling the government stands behind its promises to savers.”
He further warned that the cash grab is ultimately bad for “households and the economy”, as it removes billions from long-term pension investment.
The inheritance tax shake-up announced in the 2024 Budget drove savers not only to withdraw pension funds but also to gift wealth to family members during their lifetimes, accelerating wealth transfers.
Others chose to take their tax-free lump sum early, causing that category of withdrawals to surge by over 20 per cent to £22bn in the last financial year alone.
Steve Webb, former pensions minister and partner at LCP, said: “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 noted that speculation around caps on tax-free cash proved entirely unfounded, yet still prompted large numbers of savers to access pensions prematurely and potentially sacrifice future investment returns.
FCA data also showed that more than one million pots were accessed for the first time in the previous tax year, representing a seven per cent year-on-year rise.
The number of pots holding more than £250,000 that were accessed also jumped nine per cent, up from seven per cent recorded the previous year, suggesting wealthier savers are increasingly alarmed.
Pension providers warned savers against knee-jerk reactions in the run-up to last year’s Budget, urging them to wait for then-Chancellor Rachel Reeves to make her formal announcements before acting.
Webb urged savers not to repeat the same pattern of behaviour, while simultaneously calling on Healey to provide clear and firm guidance ahead of next month’s Budget.
He said: “We desperately need a period of stability in government tax policy, as continuing uncertainty is destabilising and distorts people’s financial planning.”
Industry figures are now pressing Healey to make an early public commitment to pension tax stability, arguing that inaction carries a measurable economic cost that far outweighs any short-term political convenience.