Retirees are facing delays lasting weeks to access their pensions following a rush of activity after Rachel Reeves’s Budget.
There has been an increase in withdrawal requests after the Chancellor announced that pension pots would no longer be exempt from inheritance tax (IHT) as of April 2027.
As a result, providers confirmed some people face delays of up to two months.
Daniel Hough, financial planner at wealth manager RBC Brewin Dolphin, said: “There are widespread delays for people looking to withdraw money from their pensions, because providers have been inundated with requests since October’s Budget.
“While prior to Christmas it would typically take around two weeks from receipt of the instruction or payment request, now it is nearer to six – we even had a case where it took two months for the client to receive their cash.”
It comes following October’s Budget where Reeves said pensions were being brought within individuals’ estates for IHT purposes, from 6 April, 2027.
In response, many people have come to the conclusion that they would rather spend the money and are looking to cash in on their pension savings, rather than land their family with a large IHT bill.
Chris Ball, chief executive at the independent financial advisory firm Hoxton Wealth, said: “Following the recent Budget, we’ve seen a surge in pension enquiries, particularly from those accessing their retirement funds.
“This increased demand has placed pressure on pension providers, leading to processing delays that could last for weeks or even months depending on the provider.”
Inheritance tax is charged at 40 per cent on the value of an estate worth more than £325,000.
Homeowners leaving their main property to their children can claim an extra £175,000 tax-free allowance which means a couple can pass on £1m without having to pay the tax.
However, many will go over the allowance once pensions are included.
Lisa Picardo, chief business officer UK at PensionBee, said: “The surge in pension withdrawals following the Budget underscores the critical role of tax stability in long-term financial planning and highlights the damage that can be done when people face uncertainty and change.
“With pensions set to be included in estates for inheritance tax purposes from 2027, it’s understandable that many savers are re-evaluating their options.”
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Experts have warned that taking money out of a pension now could leave people short in later life.
Rob Morgan, chief investment analyst at Charles Stanley, said: “It is important people give serious thought to pension withdrawals and carefully think through the consequences. Taking money out is usually a one-off decision that cannot be reversed.
“Retaining money in a pension keeps it in an environment where investment returns are tax free. In addition, withdrawals are taxable, beyond the first 25 per cent usually, so large amounts can be significantly eroded by income tax. Planning withdrawals around income patterns and other individual circumstances for maximum tax efficiency is very important, and people should not panic into a knee-jerk reaction.
“That’s especially the case because the proposed rules, if they are enacted in full, do not start until April 2027. The details are not yet known in full. Rather than rush into a decision, pension savers have time to weigh things up.”
Those who are still looking to make a withdrawal are advised to plan ahead given how long the delays are.
Hough said: “Ultimately, you only have so much control over how long it takes to access your pension – it is entirely dependent on how quickly the pension provider can operate.
“If you are looking to make a withdrawal from your pension before the end of the tax year, it is unlikely to happen within that timeframe – so factor into your plans that it may fall into 2025/26 instead.”
He said providers seem to be prioritising requests for withdrawals that would be considered taxable income, given the importance of that falling into one tax year or another.
“Tax-free lump sums appear to be taking longer, as they are, by definition, free of any taxation consequences.
“Whether your pension provider is large or small, the delays are the same across the board. If you submit instructions, be prepared for the fact that it might take four or five weeks to complete, and speak to your financial adviser about the knock-on effect this may have for your financial situation in the coming months.”
However, some providers said they naturally expect to see an increase in withdrawals towards the end of the tax year.
Jon Greer, head of retirement policy at Quilter, said: “As we near the end of the tax year, we often see an influx of people looking to make various financial decisions, including accessing pension funds.
“With this in mind, providers will ordinarily issue clear deadlines to customers which ensure withdrawal requests are submitted and subsequently paid out within the current tax year.
“These deadlines are set out to give utmost assurance to customers that their money will be with them in time. Some transactions will happen more quickly than others, for example, where the amounts to withdraw don’t require assets to be sold because there’s sufficient cash available.”
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