Savers withdraw record £18bn from pensions amid fears over Labour tax charges

A staggering £18.08billion was withdrawn from pension pots, a 60 per cent increase on the year before.

Figures from the Financial Conduct Authority also revealed the number of savers taking 25 per cent tax-free cash jumped by 33 per cent to 111,869.

Britons continue to pull their cash despite warnings from retirement experts not to make rash moves.

The rate of these withdrawals was also not affected by Rachel Reeves' decision to leave pension tax-free lump sums untouched in the last Budget.

These numbers are expected to continue rising amid growing concerns about a cap being announced in the Autumn Budget on November 26.

One of the most popular perks of retirement is being able to withdraw 25 per cent from your pension free of tax.

The lump sums are normally used to clear mortgages and other debts before being spent on luxuries such as home renovations, new cars and holidays in retirement.

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But the Chancellor's failure to rule out a tightening of these rules is clearly playing on savers' minds.

"The 25 per cent tax-free cash is a treasured pension benefit and hugely important to savers," says Emma Sterland, chief financial planning office at Evelyn Partners.

"Many savers have a specific purpose in mind for their Pension Commencement Lump Sums - such as clearing outstanding mortgages, gifting to children, or a carefully thought-out income strategy - and while they ideally might not take it quite yet, they are also wrestling with the fear that if they don’t it could be curtailed, and they will lose out.'

Ms Sterland's firm has seen a wave of enquires from worried financial planners ever since Labour came to power.

Many financial experts have warned against the panic withdrawals, noting retirement often follows a U-shape in terms of costs - starting high, then decreasing, before ramping up again due to care expenses.

But this did not stop many people from taking out their cash last year as a precautionary measure, which means they could miss out on investment growth under the tax protection of a pension in future.

A Treasury spokesperson said: "We do not comment on speculation around changes to future tax outside of fiscal events.

"We continue to incentivise pensions savings for their intended purpose – of funding retirement instead of them being openly used as a vehicle to transfer wealth."