A significant 60% rise in pension pot withdrawals has been recorded over the last 12 months, with more than £18 billion taken out in tax-free lump sums, as savers act pre-emptively in response to upcoming changes to Inheritance Tax (IHT) rules.
According to Thomas Coombs following the 2024 Autumn Budget announcement, there has been a particularly steep increase in the six months up to March 2025—£10.43 billion withdrawn in that half-year alone, marking a 36.5% jump on the preceding six months.
The Budget unveiled that from 6 April 2027, unused pension assets will form part of an individual’s estate and will be subject to Inheritance Tax, a development prompting many account holders to withdraw funds early to preserve their estates.
Financial experts—and Thomas Coombs advisors—urge savers to consider the long-term implications of early withdrawal. While accessing 25% of a pension pot tax-free (capped at £268,275) may ease immediate IHT concerns, it brings risks such as reduced retirement income, exposure to future income tax, and limitations on reinvestment options within vehicles like ISAs (which have an annual cap).
Thomas Coombs recommends consulting with a financial adviser before making decisions, as they can help structure a retirement and estate plan that balances tax efficiency with long-term financial security.
A leading provider of accounting and tax advisory services in Leeds, Yorkshire, Thomas Coombs supports businesses and individuals across the region in areas including accountancy, estate planning, and retirement strategies. The firm draws upon deep expertise to help clients navigate evolving tax landscapes effectively.
