Hundreds of Brits have been hit with income tax bills of almost £100,000 after withdrawing their entire pension pot in a single lump sum, new analysis of Financial Conduct Authority data shows.
The research by savings and retirement business Standard Life found that retired savers who cashed in pots worth £100,000 or more paid at least £87.2m in tax over the six months from October 2024 to March 2025. That was 20% higher than in the same period a year earlier.
Single withdrawal can trigger higher tax
Mike Ambery, retirement savings director at Standard Life, said: "What catches people out is how quickly a single withdrawal can push them into higher tax bands."
He added: "In some cases, a decision that feels straightforward in the moment can mean a significant portion of the money they've worked hard to build up ends up going to tax."
Who paid the most
The figures show 392 people fully withdrew pension pots worth at least £250,000, resulting in an estimated income tax bill of at least £98,700 each. Another 1,772 people who fully cashed in pots of between £100,000 and £249,000 each paid at least £27,400 in tax.
Standard Life said these were minimum estimates based on those who fully withdrew pots of £100,000 or more. Tax paid on full withdrawals from smaller pots and regular withdrawals were not included.
Tax rules and changes
Full pension withdrawals above the 25% tax-free lump sum are usually treated as income, which can push savers into higher and additional rate tax bands.
With changes to inheritance tax on pensions planned for April 2027, Mr Ambery said it was "important to weigh it up carefully" when deciding whether to access savings earlier.
He added: "Taking money out sooner can mean bringing forward income tax liabilities, and in some cases paying more than expected."
