One third of over 60s at risk of making 1 pension mistake 'they will regret'

Finance experts have warned pensioners against making a "knee-jerk" reaction they could regret amid swirling Budget rumours. Many pensioners have reportedly tried to withdraw their eligible tax-free cash from their pension pots as speculation mounts that Rachel Reeves will make a cash grab on retirees in the upcoming autumn Budget.

However, savings and investment platform Hargreaves Lansdown warned that withdrawing money from the "tax efficient pension environment" risks exposing cash to a variety of taxes it would have avoided, such as capital gains and dividend tax. They urged retirees to do only do so if they have a plan for the tax-free lump sum, highlighting its survey that found 36% of people aged 60-78 said they didn't know what they planned to do with the money.

Helen Morrissey, head of retirement analysis at HL warned: "Rumours around pension tax-free cash continue to put people at risk of knee-jerk reactions they may come to regret.

"There will of course be people who are taking their tax-free cash as part of a long-term plan - for instance to go on holiday, carry out home renovations or gifting money to loved ones.

"However, doing so without a plan risks poor outcomes with the research showing over one third (36%) of those aged 60-78 didn't know what they would do with it."

Almost one in five (17%) of over 60s said they would put the money in an easy-access savings account, and a further 6% would opt for a current account, based on the responses of 2,000 people in October 2025.

However, the platform warned purchasing power could be "whittled away" if the money is kept in an account with a poor interest rate for too long.

Ms Morrissey urged: "This is money for your long-term future that needs to be planned for carefully, otherwise you could be left counting the cost."

The retirement expert advised that the money cannot be reinvested back into the Self-Invested Personal Pensions if the Budget changes do not occur.

She warned it leaves pensioners at risk of breaching pension recycling rules, which could leave them with a sizeable tax charge that could potentially undermine their retirement planning.

Rachel Reeves will reveal her plans on November 26. Labour promised in its 2024 manifesto not to raise income taxes, VAT, sales tax, and corporation tax, which has caused speculation to shift towards tax hikes on pensioners. However, nothing has yet been confirmed.