Hundreds of Brits slapped with ‘unexpected’ £100,000 pension tax bills | Personal Finance | Finance

Hundreds of Brits have been slapped with bills of close to £100,000 after a single pension move left them owing a hefty sum to the taxman. An analysis of Financial Conduct Authority (FCA) data by Standard Life has revealed that retired Brits cashing in pension pots worth £100,000 or more paid at least £87.2m in tax over six months. That figure, relating to the period between October 2024 and March 2025, was over 20% higher than the same period the previous year, the study revealed.

Mike Ambery, retirement savings director at Standard Life, warned that taking a pension in a single large withdrawal can have unexpected tax consequences. “What catches people out is how quickly a single withdrawal can push them into higher tax bands,” he warned. “In some cases, a decision that feels straightforward in the moment can mean a significant portion of the money they’ve worked hard to build up ends up going to tax.”

Figures showed that a total of 392 people fully withdrew pension pots worth at least £250,000. This triggered a minimum estimated income tax bill of £98,700.

Meanwhile, 1,772 people who fully cashed in pots worth between £100,000 and £249,000 each paid at least £27,400 in tax.

However, Standard Life said that these figures were based on minimum estimates and focused on those who fully withdrew pots of £100,000 or more. They did not take into account tax paid on full withdrawals from smaller pots or regular withdrawals.

Full pension withdrawals above the 25% tax-free lump sum are usually treated as income. This, in turn, potentially pushes savers into higher and additional tax rate bands.

Mr Ambery added that tax was becoming an increasingly important part of how people think about their pensions, especially with impending changes to inheritance tax pencilled in for April 2027.

He said: “For some, this prospect may lead to decisions about accessing their savings earlier than they otherwise would have.

“However, it’s important to weigh it up carefully – taking money out sooner can mean bringing forward income tax liabilities, and in some cases paying more than expected.”