Over two million individuals accessed their retirement savings ahead of the state pension eligibility age
UK Witnesses Growing Trend of Early Pension Access
A significant number of individuals in the UK are accessing their pension funds early, with around 70% of those withdrawing since the 2015 pension freedom reforms being under the age of 65. This trend, which has led to concerns among pensions experts and regulators, is causing a stir as it threatens the sustainability of retirement plans.
According to recent data, the total number of individuals who took pension payments at the age of 65 is 885,000, with an average payment of £43,100 each. However, a more substantial figure, 1,291,000 individuals, took pension payments under the age of 59, with an average payment of £27,600 for those under 60. The total payments made to individuals under the age of 59 amount to £35.59 billion, and those between the ages of 60 and 64 account for nearly £29 billion, with an average payment of £34,500.
The state pension age in the UK is currently 66 for both men and women, but it is gradually increasing. The minimum age for taking a pension will increase from 55 to 57 in April 2028, and the state pension age will rise to 67 between 2026 and 2028, and then to 68 between 2044 and 2046. Defined contribution pension pots will be included in inheritance tax calculations from April 2027.
The Financial Conduct Authority (FCA) has expressed concern over early pension withdrawals, describing them as becoming "the new norm." This behavior, the FCA warns, risks undermining long-term retirement security because it reduces the funds available in later life. Potential consequences of this trend include the risk of running out of money in retirement, forced early retirement due to ill health or disability, and early withdrawals may crystallize losses, incur tax penalties, and reduce financial resilience in old age.
Policy considerations such as increasing the minimum age to access pensions from 55 to 57 in 2028 reflect government concerns about premature access. There is also speculation about possible future reductions to tax-free lump sum allowances, which might affect incentives around pension withdrawals. However, as of mid-2025, no confirmed policy changes have been made.
Stephen Lowe, group communications director at the retirement firm Just Group, stated that pension flexibility can be used for good or bad reasons. He also suggested that there is a lack of knowledge about how much tax-free cash is being taken and why people are accessing pensions early. Professional advice from a financial adviser can help people think about the future and understand their options fully and the longer-term consequences of their actions.
For those approaching retirement, it is essential to take the free, independent, and impartial guidance offered by Pension Wise. This guidance can help individuals make informed decisions about their retirement income and ensure they have a secure financial future.
- The trend of early pension access, fueled by the pension freedom reforms in 2015, raises questions about personal-finance strategies for retirement, as it can potentially lead to financial instability in later life.
- Amidst growing concerns, the Financial Conduct Authority (FCA) has emphasized the potential risks associated with early pension withdrawals, warning that this practice could undermine long-term retirement security and impact personal-finance management in old age.
