

Cooling Off Period Misunderstandings Are ‘Dangerous’
A leading expert at Irwin Mitchell is urging the pensions industry to lead with clarity and consistency after new data revealed a surge in early pension withdrawals amid speculation over tax-free lump sum reforms
According to the Financial Conduct Authority (FCA), the number of individuals accessing their 25% tax-free cash rose by 29% compared to the previous financial year. Even more strikingly, the total value of withdrawals jumped from £11bn to £18bn — a 62% increase — as savers rushed to secure their entitlement ahead of potential Budget changes.
Expert Opinion
“This is a pivotal moment for the pensions sector. Savers are making irreversible decisions under the false impression that they can change their minds within 30 days. That misunderstanding is dangerous — and it’s on us as an industry to fix it. We need joined-up messaging, robust warnings, and adviser training now, not after the next wave of complaints.
“Taking out the 25% tax-free lump sum at 55 may feel prudent amid Budget speculation, but it risks shrinking the pension pot and reducing future income. With life expectancy now averaging 85 for men and 88 for women, retirement could last three decades or more. Those who act hastily today may find themselves financially exposed in later life.”
Penny Cogher, Partner at Irwin Mitchell
The FCA and HMRC have confirmed that deciding to take a tax-free lump sum from a pension is a one-off decision — the FCA’s 30-day cooling-off rules do not apply. HMRC rules prevent any returned lump sum from being reinstated into a registered pension scheme.
Some consumers are also accelerating withdrawals due to upcoming Inheritance Tax (IHT) changes from April 2027, adding further complexity. For many, these rules feel “chaotic and arbitrary,” underscoring the need for clear, consistent industry messaging.
Expert Opinion
“Periods of fiscal uncertainty are when savers are most vulnerable to knee-jerk decisions. The industry must lead with clarity and consistency — not wait for regulators to intervene,” Penny Cogher, Partner at Irwin Mitchell