How Are People Using Their Pensions in Retirement? What the Latest FCA Data Tells Us (2026)
Updated: Oct 5
Retirement is no longer simply a case of taking your pension and buying an annuity. Today, people have more choice over how and when they use their pension savings. The latest FCA Retirement Income Market Data for 2025/26 gives us a useful picture of what people are actually doing when they start accessing their pensions, and the numbers show just how important retirement income planning has become.
More than £91 billion was withdrawn from pensions
During the year to 31 March 2026, more than 1 million pension plans were accessed for the first time – an increase of 7.4% on the previous year.
The total value withdrawn from pension pots rose by 21.7% to £91.2 billion. That is a significant amount of money being moved out of pension savings, and it highlights the importance of making careful decisions about how retirement savings are used.
The FCA data also shows that people are using their pension savings in several different ways, from drawdown and tax-free cash to annuities and full encashment.
Drawdown continues to grow
Drawdown remains an increasingly popular way of taking an income from a pension.
The number of pension plans entering drawdown increased by 10.5% to 401,137 during 2025/26.
With drawdown, your pension remains invested while you take money from it as and when you need it. This can provide flexibility, but it also means you need to think carefully about how much you withdraw and how long your pension needs to last.
Taking too much too soon can leave less money available later in retirement, particularly if investment returns are lower than expected.
Annuities are growing too
Interestingly, the figures don't show everyone moving towards flexible drawdown. Annuity purchases increased by 13.2%, reaching 100,144 during 2025/26.
An annuity can provide a guaranteed income for life in exchange for some or all of your pension savings. For some people, having a guaranteed income that covers essential spending can provide valuable certainty. For others, the flexibility of drawdown may be more appropriate.
There isn't one retirement income solution that works for everyone.
Tax-free cash remains popular
Taking a tax-free lump sum is another common part of accessing a pension. The FCA found that 64.5% of people entering drawdown took a Pension Commencement Lump Sum (PCLS) during 2025/26 – broadly what is commonly referred to as taking tax-free cash. For many people, the temptation is to take the maximum available lump sum as soon as they reach retirement.
But tax-free does not necessarily mean that taking the money immediately is the best option. The decision can depend on your other income, spending requirements, investments, tax position and how long you expect your pension savings to need to support you.
Good retirement income planning means looking at the bigger picture before deciding how to access your pension. This includes your expected expenditure, other sources of income, investments, tax position and the level of income you want throughout retirement.
The advice gap is perhaps the most interesting figure
One of the figures that stands out from the FCA data is the proportion of pension plans accessed with regulated advice. Just 30.8% of pension plans accessed for the first time in 2025/26 were accessed by plan holders who took regulated advice. This was broadly unchanged from 30.4% the previous year.
That means the majority of first-time pension access took place without regulated advice.
This doesn't mean that everyone accessing a pension needs financial advice. Some people will have relatively straightforward circumstances and may be comfortable making their own decisions.
However, retirement is often the point at which several financial decisions come together:
When should you start taking your pension?
How much income do you actually need?
Should you take tax-free cash?
Is drawdown or an annuity more appropriate?
How much can you afford to withdraw each year?
How should your pension remain invested?
What other savings or investments should you use?
How will your retirement income affect your tax position?
How can you make your money last throughout retirement?
These decisions can have consequences for decades.
Pension freedom brings flexibility and responsibility
The pension freedoms introduced greater flexibility over how people can access their pension savings. That flexibility can be extremely valuable, but it also means individuals have more decisions to make.
The latest FCA figures show that people are using that flexibility in different ways. Drawdown is growing, annuity purchases are growing and large amounts are being withdrawn from pension pots.
The question, therefore, isn't simply whether people have enough choice. It is whether they have the information and support they need to use that choice effectively.
Planning your retirement income
Your pension isn't simply a pot of money to access when you stop working. It may need to provide an income for 20, 30 years or more.
Good retirement income planning means looking at the bigger picture before deciding how to access your pension. This includes your expected expenditure, other sources of income, investments, tax position and the level of income you want throughout retirement. There is no universal answer to how much you should take from a pension or which retirement income option is right for you.
The important thing is to understand your options before making an irreversible or difficult-to-reverse decision.
If you're approaching retirement and want to understand how your pension could support your income in later life, professional financial advice can help you assess the options and build a retirement income strategy around your circumstances.
Source: Financial Conduct Authority, Retirement Income Market Data 2025/26, covering the period 1 April 2025 to 31 March 2026. The FCA notes that its figures relate to pension plans rather than individual consumers, and the data covers contract-based pension plans rather than trust-based workplace schemes or defined benefit schemes.
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