Key Highlights:

• Pre-budget anxiety drives surge in pension withdrawals
• Wealth managers report record levels of tax-free lump sum requests
• Finance Minister hints at potential tax changes

LONDON, Nov 5 (Reuters) – British savers are increasingly withdrawing cash from their pension pots ahead of this month’s budget, spurred by speculation over possible changes to tax-free pension withdrawals, according to leading wealth managers.

Most UK savers can currently access up to 25% of their pension as a tax-free lump sum. Some experts suggest Finance Minister Rachel Reeves may reduce this amount in future budgets, motivating early withdrawals.

Six of Britain’s top wealth managers, including Schroders and Aberdeen, reported rising client activity in recent months due to pre-budget concerns. Private bank Arbuthnot Latham said withdrawals are up 300% year-to-date compared with 2024, particularly among high-net-worth clients.

Eren Osman, Managing Director at Arbuthnot Latham, noted: “This year has seen a huge increase in clients taking lump sums out relative to their financial needs.” Similarly, AJ Bell reported withdrawal requests in September and October were roughly three times higher than in 2023.

Some managers, such as Quilter, have shared their data with the government to highlight the impact of budget speculation, while Phoenix described the rise as modest, comparable to other busy periods.

Tax-Free Pension Withdrawals Favor the Wealthy
The Institute for Fiscal Studies notes that tax-free withdrawals disproportionately benefit the wealthiest and cost the UK government around £5.5 billion annually. Finance Minister Reeves has warned of potential broad tax increases to support public finances without returning to austerity.

Financial advisers continue to caution against withdrawing retirement funds prematurely, as investment gains outside pensions are typically subject to taxation. Nonetheless, Financial Conduct Authority data show withdrawals have already surged 76% in the six months to March 2025 versus a year earlier.

Industry leaders like Legal & General CEO Antonio Simoes have expressed concern that tax changes could discourage pension saving, calling such policies “really concerning for the country.”

With the budget looming, wealth managers and advisers are closely monitoring client behavior, as preemptive pension withdrawals reflect uncertainty about future tax rules and financial planning in the UK.