New Pensions Legislation
Changes to the pension system which allow those aged 55 or higher to cash in their savings will mean a substantial sum of tax passed to the Treasury.
More money for the Treasury
A recent project by Hargreaves Lansdown and the BBC outlines that they believe this is likely to generate approximately £700m in the tax year 2015/2016, on top of the estimated £320m that would have been generated had the pension changes not taken place.
Since April, the new pensions legislation allowed those aged 55 and over have been able to take their pension pot in cash, rather than buy an annuity to provide a retirement income.
It has become clear by the public’s reaction and the press that the pension changes have not been widely understood and that the companies processing peoples retirement funds are understaffed and overworked, as well as many not understanding the new legislation, nor having new systems in place to handle the changes and the increase in paperwork and administration.
People taking their pension funds are frequently of the belief this will be completely tax-free and are shocked to discover large tax bills could be caused.
Many pensioners have taken cash from their pension pots and used the funds to enjoy luxuries in their retirement, such as holidays and cars.
The tax revenue, will assist Chancellor George Osborne in having greater funds to spend to be outlined in Wednesday’s Budget.