According to new research, more than half of pension savers are unsure of the tax rules surrounding the pension freedoms introduced earlier this year. Furthermore many pension companies do not offer their savers these freedoms at all.
A study conducted by employee benefits consultancy Portus found that 53 per cent of retirement savers are unsure about the taxation of pensions, while only 26 per cent were aware that they can take a quarter of their pension fund tax-free.
The survey of 1,080 employees found that while 54 per cent of the over 55s were aware they could take a tax-free lump sum before being subject to tax, 31 per cent of those in the age group didn’t know what the general tax implications were.
HM Revenue & Customs’ (HMRC’s) statistics released earlier this year showed that pension providers have paid out £2.7 billion since the pension freedoms came into force. The data also showed that a total of 146,000 people accessed their pension pots through 251,000 payments between April and September. Of these pay-outs, more than £1.5 billion was collected by around 84,000 savers between April and June and just under £1.2 billion was received by 81,000 people between July and September.
HMRC added that it had no comparative data from this time last year and could not say how much tax was collected as a result of the pension withdrawals.
However, with the lack of clarity over the current tax rules, it is clear that some savers may face a larger tax bill than they expected.
Milsted Langdon’s Independent Financial Advisers can provide expert advice on all aspects of pensions and retirement planning, to help you clarify your options and make informed decisions to maximise retirement income. In particular you may be eligible for a review, without charge or obligation to ascertain whether or not your pension provider is one of those that has declined to offer the new freedoms and to advise on the options that may be available. For more information, please contact us.
Link: HMRC – Flexible Payments from Pensions