Seven in 10 (70%) of the 3.42m people who have taken taxable payments from their pension pots since the inception of ‘Pension Freedoms’ in 2015 were under 65.
Analysis of HMRC data showed that 2.4m people first took a taxable flexible pension payment when they were at a pre-state retirement age.
The analysis by Insurtech firm Lumera revealed that £75.5bn has been taken from pensions as taxable flexible payments since 2015 by individuals who were under 65 when they took a taxable payment.
The number of under-65s taking a taxable pension payment rose by 7% from 602,000 in 2024/25 to 644,000 in 2025/6, with the total value of taxable payments to that group increasing by £1.1bn over the same time period – from £10.3bn in 2024/25 to £11.4bn in 2025/26.
Crucially, the payments do not include the tax-free lump sum, highlighting the scale of early pension access, and prompting questions about the sustainability of drawdown levels and long-term implications for retirement income security, the firm said.
It warned that taxable pension withdrawals can have significant consequences for people accessing their pension savings while they are still working.
While savers can usually take up to 25% of their pension tax-free, further withdrawals are added to their other taxable income and could push them into a higher tax band. Lumera also warned that flexibly accessing taxable pension income can also trigger the Money Purchase Annual Allowance, reducing the amount that can subsequently be paid into defined contribution pensions with tax relief from £60,000 to £10,000 a year.
Peter Roos, chief commercial officer at Lumera, said: “Pension freedoms have given millions of people much greater flexibility over how and when they use their retirement savings but accessing a pension early can have important and sometimes overlooked consequences.
“The concern is not necessarily that people are accessing their pensions before 65 – for many, doing so will be entirely appropriate – but whether they fully understand the tax implications and the potential impact on their longer-term retirement income. Taking money out earlier also means losing the potential investment growth on those savings and leaving a smaller pot to support what could be several decades in retirement.”