Should You Take Your Tax-Free Cash Before the Budget?
September 30, 2025

Should You Take Your Tax-Free Cash Before the Budget?

When you take tax-free cash from your pension, you start using up one of your most flexible retirement tools.

Speculation is swirling again. With the Autumn Budget approaching, the press is full of rumours about what the Chancellor might do with pension rules – especially the tax-free cash allowance. Unsurprisingly, this has left some clients feeling unsettled and coming to us with questions.

Some people have already decided to take their cash now, just in case. For a few, that’s the right choice: if you need the money in the near future, accessing it may be sensible. But for many others, acting out of fear could prove unnecessary – and sometimes damaging – in the long run.

What can we learn from past Budgets?

This isn’t the first time pensions have been in the headlines. We’ve seen similar speculation before: whispers of sweeping cuts that never happened, or changes that turned out to be far less drastic than expected. In those cases, people who acted in haste often found they had lost valuable flexibility for no real reason.

History tells us that rumours don’t always become policy, and that rushed decisions can close doors that may have been better left open.

An imagined example: James

Let’s imagine for a moment a man in his 50s, who has built up a sizeable pension pot. He’s still working, doesn’t need extra income right now, but has read in the papers that tax-free cash might be cut. Let’s call him James.

James decides to take his lump sum early, thinking it’s the safe option. A year later, the rules remain unchanged. He now has a large amount sitting in cash, earning little interest, and his pension has lost some key advantages. For example, once money is withdrawn it no longer benefits from the tax-efficient growth available inside a pension. He may also find that future contributions are restricted under the Money Purchase Annual Allowance – limiting how much he can rebuild his pension in the years ahead.

This isn’t to say James was wrong – just that his choice limited his future options. For someone else, the same decision might have made sense.

Why might pausing be better than panicking?

When you take tax-free cash from your pension, you start using up one of your most flexible retirement tools. If the feared changes never materialise, you may regret the move – especially if it reduces the options available to you later.

That doesn’t mean doing nothing is always right. Some people may choose to take the cash and reinvest it elsewhere maybe as part of a wider IHT planning strategy, or into a Trust for the grandchildren's education.  Others might need immediate access to the money for family support, home improvements, or healthcare. The key is to be clear on your own needs and not simply react to headlines.

Everyone’s strategy will be different

This is where personalised financial planning really matters. There isn’t a single “correct” response to Budget speculation. The right decision depends on how soon you need access to funds, the rest of your retirement income plan, your tax position now and in the future, and how much flexibility you want to preserve.

Talk it through before acting

If you’re feeling nervous, please don’t feel pressured to make a quick move. Take the time to talk it over. Your adviser can help weigh up the risks, explore alternatives, and put decisions in the context of your longer-term plan.

We know from experience that calm, measured strategies usually work out better than reacting to every political headline.

If you’d like to explore your options, we’d be happy to talk it through with you.

By Daren Wallbank, Chartered Financial Planner and co-owner, Ginkgo Financial

Important information:

The value of investments can go down as well as up and you may get back less than you invest. Past performance is not a reliable indicator of future results.

Approver Quilter Financial Services Limited Ltd 22/09/2025

Related News