Number of people taking pension lump sums as early as they can hits 116,000 as IHT fears bite – a five year high
Nicholas Clark, 9 April 2026
Nicholas Clark, 9 April 2026
According to our research, 116,000 individuals made lump-sum withdrawals from their pensions as soon as they could (i.e. aged 55) in the last year, up from 110,000 the previous year and a five-year high.
The total value withdrawn by those aged 55 also reached a five-year high of £2.3bn, up from £2.1bn the previous year.
More people have been taking lump sum withdrawals from their pensions following the announcement in the 2024 Autumn Budget that pensions will face inheritance tax (IHT) from April 2027, says Andrew Tricker, Director at Lubbock Fine Wealth Management.
Andrew says: “As pensions will be dragged into the IHT net, many are rushing to take money out as soon as they can to help mitigate what they see as excessive tax bills for their dependents.”
“What is surprising is that this trend has spread to people who have decades left based on average life expectancy.”
The number of people withdrawing money from their pensions is likely to rise further as the new IHT changes draw closer, says Nicholas Clark, Chartered Financial Planner at LFWM.
Nicholas says: “As we get closer to the deadline, more people will tap into their pension pots – particularly those who can do so without creating a big tax liability.
“Pensions were widely seen as highly ‘tax-efficient’, so many people built and preserved very large pots to pass on wealth to their loved ones free of IHT. Some of them have now started to change course, often without fully thinking it through.”
Some are choosing to pass these funds on to their families during their lifetime to reduce IHT exposure, adds Nick. Gifts made more than seven years before death generally fall outside inheritance tax.
Andrew says people must avoid making decisions to transfer funds elsewhere without proper planning, as money withdrawn from a pension is difficult to put back.
He adds: “It is worrying that more people are tapping their pension pots so long before the usual retirement age. Some are taking too much, too soon. Without careful planning, they could find themselves short of money in retirement.”
“People are living longer, and health and care costs are very unpredictable in retirement. That is why retirees need a financial buffer. Income is much harder to increase once you stop working.”
Nicholas Clark says: “In many cases, it makes sense to keep funds within the pension and draw them down gradually, being able to review retirement income over time and adjusting as needed is one of the main benefits of the pension freedoms introduced in 2015.”
“Keeping funds within the pension also allows people to make greater use of the ‘gifts out of surplus income’ exemption. Income drawn from a pension can qualify as surplus income, meaning it can be passed on to loved ones without triggering an inheritance tax bill.”
