Overview

• HMRC’s update states that once a lump sum is paid, the tax consequences, including use of lump‑sum and death benefit allowances, cannot be undone even if the money is returned or a cancellation right is used.
• The FCA says its rules do not prevent firms from offering extra cancellation rights, but any voluntary cooling‑off offered by providers does not change HMRC’s tax treatment.
• Pension withdrawals in 2024/25 rose 36% as many savers reacted to speculation about possible Budget changes to tax‑free cash.
• Experts warn that many first‑time accessors have triggered the Money Purchase Annual Allowance, which reduces future tax‑relieved contributions to about £10,000 a year, and that few seek professional advice.
• Advisers caution that taking tax‑free cash without a clear plan can erode returns and create unexpected tax on income, interest or gains outside a pension.