Under-65s Have Taken £75.5bn in Taxable Pension Drawdowns

New HMRC data analysed by Lumera shows 2.4m savers made taxable pension withdrawals before 65, taking £75.5bn since 2015—£11.4bn in 2025/26 alone. Tax-free lump sums are excluded.

Under-65s Have Taken £75.5bn in Taxable Pension Drawdowns Since 2015

New analysis of HMRC data by pension technology firm Lumera shows that 2.4 million people first made a taxable flexible pension withdrawal while they were under 65 after the pension freedoms launched in 2015. That group accounts for seven in ten of the 3.42 million pension savers who have taken taxable payments from their pots, and they have withdrawn £75.5 billion in taxable form in total.

The trend is still accelerating. In 2025/26, 644,000 under-65s took a taxable pension payment, up 7% from 602,000 in 2024/25, while the amount taken rose from £10.3 billion to £11.4 billion. The figures do not include the tax-free lump sum, so the actual cash released from pension pots is higher than the taxable total alone.

Taking a taxable payment while still working comes with specific consequences. The withdrawal is added to other taxable income and can move a saver into a higher tax band. It can also trigger the Money Purchase Annual Allowance, which reduces the amount that can subsequently be paid into defined contribution pensions with tax relief from £60,000 to £10,000 a year.

What Early Pension Access Means for Tax and Retirement Income

The HMRC data establishes the scale of early pension access. The focus of the analysis is less on whether early access is wrong than on what savers give up when they take taxable drawdown.

Taxable Drawdown Is Taxed as Income

For someone still in work, a taxable pension withdrawal sits on top of salary, bonus or rental income in the same tax year. The source shows £11.4 billion of taxable payments were taken by under-65s in 2025/26, but it does not show the tax paid. The practical point is that a saver who withdraws in a year when they are already near the higher-rate threshold could pay 40% or more on at least part of the withdrawal, even if the headline tax-free lump sum is untouched.

The MPAA Turns a One-Off Withdrawal into a Long-Term Limit

Flexible access to taxable pension income can trigger the Money Purchase Annual Allowance. After the first payment, annual tax-relieved defined contribution contributions fall from £60,000 to £10,000. That is the structural risk Lumera's chief commercial officer Peter Roos identifies: someone who takes cash early and later wants to rebuild the pot may find the tax system sharply limits how quickly they can do so.

The Retirement Longevity Trade-Off

Lumera's commentary also points to the loss of investment growth on money withdrawn early. A pot that is reduced early has less time to compound and must still support what could be several decades in retirement. The £75.5 billion of taxable withdrawals across 2.4 million early accessors is therefore not only a tax event; it is a measure of retirement assets already removed from long-term growth.

Practical Checks Before Taking Taxable Pension Income Early

For savers considering a taxable withdrawal before 65, the Lumera/HMRC data points to four concrete checks.

Run the marginal-rate calculation first. Taxable drawdown is added to salary and other income. With £11.4 billion taken this way by under-65s in 2025/26, the withdrawal may cross the basic-rate threshold, making part of it taxable at 40% or higher.
Check the MPAA trigger before taking flexible taxable income. Once triggered, tax-relieved defined contribution pension contributions fall from £60,000 to £10,000 a year. This cannot be reset, so the first taxable payment matters more than a later top-up.
Use the tax-free 25% lump sum before taxable drawdown where possible. The £75.5 billion total excludes tax-free cash, so the first 25% of the pot may be available without immediate income tax, leaving taxable withdrawals to be planned separately.
Re-run the pot’s expected retirement income after the withdrawal. The 2.4 million early accessors in the data have already removed £75.5 billion in taxable payments, and money withdrawn early also loses future investment growth for a retirement that could last decades.