More pension plans were accessed through drawdown or annuities in the year to March 2026 while fewer pots were fully cashed out compared with a year earlier, new data from the Financial Conduct Authority shows. However, a significant number of plans are being withdrawn at a rate of 8% or more.

Taking out everything is still the most common form a pot is accessed, but the total sums encashed are smaller than for drawdown or annuities, the latest Retirement Income Market Data by the FCA has found.  

The percentage of policies where pots were first accessed and fully encashed between April 2025 and March 2026 was at 49% in the first half of the year, dropping to 43% in the second half. This is slightly lower than 2024-25 and a bigger drop compared with 2023-24. While full encashment remains the largest slice in terms of number of policies accessed, it does not lead in monetary terms, as most such pots contained less than £10,000.  

Meanwhile, new drawdown policies accounted for £70.6bn of the £91.2bn combined pots accessed for the first time. The number of drawdown policies also increased by 10.5% to 401,137 up from 362,946 in the previous year, and annuity purchases are up 13.2%. 

Small pots were more likely to be fully cashed out

However, the proportion taking some of their pension as a lump sum has gone up; the majority (64.5%) of those who entered drawdown did so, a rise from 61.9% a year earlier.  

With speculation about tax rises running high ahead of each of the last Labour government's two Budgets, some say this has contributed to a surge in Pension Commencement Lump Sums being taken. Investment firm AJ Bell said withdrawals rose sharply to £18.3bn in 2024-25, "indicating a £10bn increase spurred by rumours of a possible cut to tax-free cash at the Autumn Budget 2024".  

Public policy director Tom Selby said: “People making decisions about their pensions based on fear is clearly undesirable, particularly as such decisions are irreversible and can lead to significant financial harm. This behaviour is also the opposite of what the government wants as it attempts to harness pensions capital to drive investment into UK plc." 

Selby called on chancellor John Healey to pledge not to change tax-free cash entitlements or tax relief in the long term.  

Concerns also remain over the rate at which people draw down their pension, as most plans are depleted at a rate of 8% or more, with pots containing £10,000 to £29,000 most likely to be drawn down at this speed. Just under a third (30.8%) of pension pots were taken with the help of regulated financial advice, which is only a marginal increase from the previous year. 

Withdrawal of 8% or more was the most common rate for all pot sizes except the largest

David Brooks, head of policy at consultancy Broadstone, said the fact around a third of a million pensions are being withdrawn at rates of 8% or higher "will inevitably raise questions about long-term sustainability". 

 

However, he pointed out that the data itself does not reveal whether such withdrawal rates are appropriate in the context of an individual's wider finances. Pensions becoming subject to inheritance tax from next April could have prompted some of the withdrawals, he suggested. 

    

“What this data does highlight is the growing need for better support at retirement," Brooks said. “That is why the development of guided retirement solutions could prove so important over the coming years. Pension freedoms gave savers flexibility over how they access their money, but the industry is still grappling with how best to help people turn pension pots into sustainable retirement incomes. The direction of travel is promising, but designing solutions that can deliver good outcomes across a highly diverse retiree population remains a significant challenge.”