Retirees hit with £87.2m tax bill after cashing in pension pots, analysis finds

Retirees paid at least £87.2m in tax after cashing in pension pots worth £100,000 or more between October 2024 and March 2025, according to analysis of Financial Conduct Authority (FCA) data from Standard Life. 

The tax paid was up more than 20% on the previous year. 

Standard Life found 392 people each paid a minimum of £98,700 after withdrawing pension pots of £250,000 or more. 

Another 1,772 people cashed in pots between £100,000 and £249,000, each paying at least £27,400 in tax.

Analysis showed that someone withdrawing a pot worth £174,500 could face a tax bill of around £64,700, while cashing in a £500,000 pension in one go could mean paying more than £150,000 in tax. 

Withdrawals of £1m could see £300,000 or more go to HMRC.

Mike Ambery, retirement savings director at Standard Life, said: “Life doesn’t always follow a set path, and when people reach the point of accessing their pension, there are often a lot of competing priorities. 

“For some, taking a larger amount upfront will feel like the simplest option, but it can come with a sting in its tail in the form of a higher tax bill than many expect.