Pension withdrawals jump 36% to £70.9bn: new Air report urges advisers to rethink ‘which pot?’ planning

January 13, 2026

A new report from market-leading later life lending platform Air, produced with Technical Connection and Ad Lucem, says a hardening inheritance tax context – with unused pensions set to become part of the potentially taxable estate from 6 April 2027 – is changing the sequencing conversations advisers are having.

“Best Practice” drawdown and intergenerational planning strategies are being re-thought founded on an “all asset” basis. And for many families that all asset approach must include the family home: it’s part of the balance sheet, and it should be treated as such and not “ruled out” of consideration – especially where liquidity is limited.

The report, The Home Belongs in the Plan highlights a clear behavioural signal: in 2024/25 (to 31 March 2025), FCA retirement income market data shows the overall value of money withdrawn from pension pots rose 36% year-on-year to £70.9bn, while tax-free cash withdrawn jumped 60.7% (from £11.25bn to £18.08bn) – a sign that many families are bringing liquidity decisions forward as they reassess how to fund retirement, gifting and legacy plans.

For some, releasing funds from their pension will enable them to plan for themselves and their family but for others this liquidity will not be enough for them to achieve their personal and intergenerational planning objectives.

In relation to intergenerational planning the “help now, not later” pressure is already mainstream. The report cites research showing that nearly half of under-35 homebuyers received financial help from family in 2024, with the average contribution around £27,500, supporting an estimated 335,000 family-assisted home purchases.

Against that backdrop, the report argues that it is becoming harder to run truly holistic planning conversations without acknowledging the scale of housing wealth. Equity Release Council market data cited in the paper estimates UK homeowner equity at £5.7tn, including £3.4tn held by over-55s.

Importantly, the report stresses that bringing the home into the plan won’t be right for all clients – but for more than a few it may be, provided it is founded on informed advice, clear adviser explanation and confirmed client understanding.

Later life lending can facilitate the achievement of strongly desired “today” outcomes but will also involve costs and can reduce overall inheritance. That’s why a documented, informed decision is absolutely essential. It is about a Consumer Duty-aligned advice process that:

Keeps a clear set of alternatives on the table (cash, portfolio sales, pension withdrawals, downsizing, family loans, doing nothing).
Explains costs and trade-offs in plain English (including inheritance impacts).
Tests and records client understanding.
Uses referral routes where appropriate as a controlled first step.

Tony Wickenden, Founder and Managing Director of Technical Connection, said:
“Clarity over “the numbers” is absolutely essential before any decisions are made but it also has to be recognised that the role of financial planning is to help clients achieve what is important to them in life. Families don’t live on spreadsheets. Many clients want to support children and grandchildren at pivotal moments – but they’re understandably wary of dismantling portfolios or compromising their future financial security. The point isn’t to push a product; it’s to build a disciplined, repeatable way to weigh options, explain trade-offs and document understanding so decisions are genuinely informed…and which, when appropriate, incorporate at least a consideration of how the main residence and Later Life Lending could be used.

Will Hale, CEO of Air, said:
“With pensions set to fall into IHT from 6 April 2027, the old sequencing rules are being re-written and ‘which pot do we spend?’ has become one of the most consequential questions families will ask. This is a question advisers can’t afford to answer on autopilot. Our aim is to equip advisers with the insight, tools and support to bring the home into that conversation safely – whether that means establishing referral partnerships or building capability over time.”

Responding to Air’s latest report ‘The home belongs in the plan’, Pete Maddern, Managing Director, Retirement, Canada Life said:

“Later life lending is an increasingly vital component in sustaining retirement income, particularly as pension pots alone may not be sufficient for many future retirees. With property wealth now accounting for 40%* of total household wealth in Great Britain, Air’s report highlights the significant opportunity for advisers to help their clients unlock the value in their homes, enhancing both financial security and quality of life in later years.

“The forthcoming inclusion of pensions within the inheritance tax (IHT) net from 2027 will fundamentally reshape the advice landscape. As more clients are drawn into the IHT net, many are reassessing their financial strategies, and our data shows that growing numbers are using equity release as part of their estate planning – supporting loved ones through gifting and managing potential future inheritance tax liabilities.

“The FCA’s ongoing work exploring how the later life lending sector and advice framework can better meet an individual’s needs in later life is another indicator of positive progress. The sector’s steady growth, ongoing product innovation, and the regulator’s renewed focus will enable advisers to take a more holistic view of their clients’ finances, and to recognise the value of equity release as an integral component of a well-rounded financial plan.”

The Home Belongs in the Plan is available to download at:
https://homeintheplan.airlaterlife.co.uk/