The importance of staying calm during Pension Panic

With the Autumn Budget now pushed back to late November, pension savers are once again caught in a whirlwind of government rumours and possible changes. 

At the start of September, Torsten Bell, the Pensions Minister, refused to rule out a raid on pensions in the Budget. Given his previous role at Resolution Foundation, in which he made an argument for a cap of £40,000 on the tax-free pension lump sum, the uncertainty is again concerning pension savers. 

With the impact of the 2024 Budget still reverberating, pension withdrawals shot up by 35.9% in 2024/25, to a total of £70.1bn.(1) The two big factors that drove this were Inheritance Tax (IHT) worries – with pensions set to be included in IHT from 2027, and as mentioned previously, the tax-free lump sum rumours that started last year and won’t go away. 

The FCA’s Retirement Income Market Data 2024/25 report published in September, shows just how jittery savers became. In the six months leading up to September 2024 – peak rumour season – over 99,000 drawdown pots were accessed for tax-free cash which increased to 112,000 in the six months to March 2025.(1) 

Former pensions minister, Steve Webb, summed it up bluntly “these figures show how uncertainty about pensions and tax can move the market”, pointing out that not only did savers rush to access larger pots before the Budget (fearing cuts to tax-free cash), but withdrawals actually accelerated after the Budget.  

Why? Because attention shifted to the looming IHT changes. 

In other words, rather than pensions being treated as the long-term safety nets they were designed to be, short-term politics are pushing people into knee-jerk decisions. As Webb put it, it’s “deeply disappointing” to see consumer behaviour driven by policy uncertainty. 

The FCA also reported: 

• Sales of drawdown policies rose by 25.5% to nearly 350,000. 

• First-time access to pots was up by 8.6%, with almost 962,000 people dipping in for the first time. 

How does this translate into the real world? Many will now be sitting on cash they don’t need, which was purely withdrawn to get ahead of potential tax changes. With such constant tinkering of the rules, clients may be making rash decisions for the wrong reasons which, in the future, may have a significant impact.  

Before you make any snap decisions, our financial planners will guide you through five basic steps before any decisions are made. Here’s how: 

1. Take a full look at the estate
   We’ll sit down with you and review everything – pensions, ISAs, property, life cover – to show exactly where you stand now and how things will look once the 2027 rules kick in. It’s about seeing the whole picture, not just one pot in isolation. 
2. Check who gets what
   Those “expression of wishes” forms you filled in years ago when you set up potentially one of your many workplace pensions – they matter! At Equilibrium, our financial planners make sure they’re up to date and actually reflect what you want to happen. If they don’t, it could mean funds end up in the wrong place – and with an unnecessary tax bill attached. 
3. Think about drawing down or gifting early
   Sometimes it makes sense to dip into pensions sooner or gift money while you’re still here, especially if it helps reduce future IHT. But timing is everything – go too early and you could miss out on growth; leave it too late and the taxman takes a bigger slice. Our financial planners are here to help you strike the right balance. 
4. Make the tax bands work for you
   This is where the numbers get technical, but in plain English, it’s about using the lower tax bands to your advantage. That might mean taking pension income up to your basic rate limit or spreading withdrawals across family members to avoid tipping into higher brackets. If done right, it keeps more money in your pocket – and out of HMRC’s. 
5. Plan for the tax bill itself
   When someone dies, HMRC doesn’t hang around. If there’s IHT to pay, it needs to be paid – often before the estate can be distributed. Our planners will make sure there’s cash (or easily sold assets) available, so your family isn’t forced to flog the house or sell investments at a bad time just to cover the bill. 

So, don’t let rumours dictate your retirement. The headlines will come and go, but with the right planning, your future doesn’t have to be at the mercy of the next Budget speech. 

This blog is intended as an information piece and should not be construed as advice.  

If you have any questions, queries or would like to take action, please don’t hesitate to contact us:

• Equilibrium client: Call us on 0161 486 2250 or by getting in touch with your usual Equilibrium contact.
• New to Equilibrium: Call us on 0161 383 3335 or contact us here for a no-cost, no-obligation initial chat.