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Record pension withdrawals follow tax changes

672,000 pensioners took £5 billion from pensions after new inheritance tax announced.

August 3, 2025 at 05:15 PM

Reeves horror as retirees pull billions out of pension pots

A surge in pension withdrawals highlights widespread concern over new tax policies.

Retirees withdraw billions due to pension tax changes

In the first quarter of this year, a staggering 672,000 pensioners withdrew a record £5 billion from their retirement accounts, following Rachel Reeves' announcement of changes to inheritance tax rules. This figure represents a 25% increase compared to the same quarter last year, with an additional 13% of individuals making withdrawals. The Chancellor aims to raise £1.5 billion through a new 40% inheritance tax set to take effect in April 2027, impacting pension pots. Critics, including former pensions minister Baroness Altman, warn this could lead to increased financial insecurity among retirees, labeling it a potential pensioner poverty crisis.

Key Takeaways

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672,000 pensioners withdrew £5 billion in the first quarter of 2023.

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Withdrawal amounts rose by 25% from the previous year.

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Announced inheritance tax changes will apply to pensions starting 2027.

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Baroness Altman warns of a pending poverty crisis for retirees.

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80% increase in withdrawals from those aged 81 and older was reported.

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Critics argue that government policies may undermine future pension savings.

"This IHT imposition will ensure more and more people will just say, 'Why on earth would I want to lose two thirds of my pension to the taxman?'"

Baroness Altman highlights the detrimental impact of the inheritance tax policy on pension saving habits.

"People will save less for their pension and withdraw more, affecting their ability to pass on money."

Former pensions minister Guy Opperman warns about the long-term consequences of the new tax policy.

The recent spike in pension withdrawals reflects deep-seated anxieties regarding the government's approach to taxation, particularly with the looming threat of high inheritance taxes. As financial incentives shift away from long-term saving, the landscape for future retirees grows increasingly uncertain. With economists and former officials sounding alarms, the implications of these policy changes could extend far beyond immediate withdrawals, jeopardizing the financial well-being of countless individuals. The call for reconsideration from various quarters underscores the urgent need for a balanced approach that protects both savings and future inheritances.