Will new tax year and cost-of-living crisis cause a spike in pension withdrawals?

Savers are expected to access record amounts from their retirement pots in the next three months.

The start of a new tax year is traditionally peak pension withdrawal season in the UK, as savers take advantage of a fresh set of allowances.

The only exception to this was in 2020, when uncertainty caused by the pandemic saw savers pause or reduce withdrawals.

With Brits facing higher living costs as inflation spikes, withdrawals will almost certainly hit new highs in April, May and June 2022.

Tom Selby, head of retirement policy at AJ Bell, comments: “The start of the tax year is traditionally peak pension withdrawal season, with hundreds of thousands of savers dipping into their retirement pot – many for the very first time.

“This year is likely to see record numbers accessing their hard-earned pension pot. Spiralling inflation is already hitting household budgets and as eye-watering gas bills land at millions of Brits’ doors, it is inevitable more people will turn to their pensions to ease the immediate financial pain.

“Anyone thinking about accessing their pension for the first time or hiking withdrawals to cope with rising living costs should stop and think before making a rash decision. Accessing your retirement pot early or withdrawing too much, too soon could have disastrous consequences over the long-term.

“What’s more, the generous tax treatment on death of pensions means it often make sense for your pension to be the last asset you touch.”