We are twelve years on from the announcement we could spend our pensions as we liked. We thought that people cashing in their pensions was something that might happen in the early years and that over time encashment with its crippling tax consequences would stop.
But this doesn’t seem to be the case. Standard Life link behaviour that they’ve discovered studying FCA data.
Between October 2024 and March 2025, almost 400 people took out pension pots worth £250,000 or more in one go. Each of those savers faced a minimum income tax bill of £98,700, according to Standard Life. The number pulling out sums that size was around a third higher than in the same six months a year earlier, and the scale of the shift is set out below.
The number is small (400 is very small) but it is enough for Standard Life to link this increase of tax-recklessness to a worry of leaving the next generation with inheritance tax.
I guess that paying money to the tax man now is seen as preferable but the story only tells us of a much bigger problem with pension and tax.
Our problem taking bad pension decisions for fear of tax changes
People’s behaviour is linked at a less extreme but more popular level with worries about losing out on tax-free cash. (Sky News 10.58am Weds 22nd) 
There are of course other reasons for having your tax-free cash. Current mortgage rates are high enough to make paying off capital with this cash a sensible thing to do, but if people are simply taking cash because it is tax-free and might not be beyond the next budget, then there’s something wrong.
People should be able to plan around the opportunities within their pension and whether that pension is to be paid as DB, CDC or with the freedom of the tax-free cash from DC saving, is should be available as promised and as saved for.
Which is why I am with Tom Selby in this. Now would be a good time for John Healey as our new Chancellor to give us an assurance. I am pleased to see that this blog’s old David Pitt-Watson has been given a Ministerial Appointment in the Treasury
I hope that he will take this matter up alongside others such as Andy Haldane who advise the Treasury on matters that include pensions.
People should take their tax free cash based on needing the money and not to bank a tax-break that they fear could be removed. An assurance as given on the triple lock would be helpful from John Healey