Nearly half of financial advisers have seen clients withdraw tax-free cash from their pensions in the run-up to the Budget, driven by fears that the government may cut the amount available, new research from the Personal Investment Management & Financial Advice Association shows. Currently, savers can take a 25 per cent lump sum from their pension pot, worth up to £268,275. The wave of withdrawals reflects concern about potential changes to this allowance, though Chancellor John Healey has reportedly ruled out alterations to tax-free lump sum rules in Wednesday's Budget.
Inheritance tax planning has dominated the concerns of both advisers and their clients. Two-thirds of the 73 financial advice firms surveyed reported an increase in enquiries about inheritance tax and estate planning over the past month, more than for any other tax-related topic. More than half of firms said clients are bringing forward planned gifts or wealth transfers ahead of changes scheduled for spring 2027, when unused pension funds will be brought into the scope of inheritance tax calculations for the first time. When advisers were asked which areas of taxation most needed long-term clarity, 70 per cent cited inheritance tax as the top priority.
Other tax-related decisions have also been pulled forward. Just over 45 per cent of adviser firms reported that clients had increased or maximised their Individual Savings Account contributions, while 30 per cent saw increased enquiries about Isas. From April 2027, the cash Isa allowance will fall to £12,000 annually, except for savers aged over 65, in a policy aimed at encouraging investment in stocks and shares.
David Ostojitsch, director of policy at PIMFA, warned that speculation about potential tax changes is prompting people to make significant financial decisions without certainty. 'Clients are seeking advice and bringing forward financial decisions before we know what the Budget will contain,' he said. Pension experts caution against withdrawing tax-free cash early unless savers have definite spending plans, as early withdrawals can reduce long-term retirement income by missing out on investment growth.
The current wave of activity echoes what happened after the previous Budget. Tom Selby, director of public policy at AJ Bell, noted that an 'eye-watering £22billion of tax-free cash' was accessed in 2025-26, which was £14billion higher than pre-election averages, driven largely by fear rather than genuine financial planning. He called on the government to provide long-term certainty on pension taxation to stop what he described as an annual 'damaging game of pre-Budget chicken'.
For UK savers, the combination of inheritance tax changes, potential Isa allowance reductions and uncertainty about future pension rules means many face pressure to make rushed financial decisions that may not align with their long-term retirement planning needs.