Huge Taxes From Pension Withdrawals Often Forgotten
Pensioners often forget that they have a tax bill to pay after they withdraw their money from their pension pot. The new pension freedoms improved April last year came with warnings of huge taxes for withdrawals before anyone’s retirement age.
Consumer group Citizen’s Advice warned that pension withdrawals would cause deductions from welfare payments to the income they receive after they approve of releasing their pension funds.
“The pension freedoms are popular with consumers but some people are experiencing unexpected losses,” said Gillian Guy, chief executive of Citizens Advice.
“The changes are giving huge numbers of people the choice of how to access their retirement savings, offering them more options about how to use the money to best fit their lives.
“As people’s pension choices become more complicated government and providers need to continue their work to promote free Pension Wise guidance, ensuring people are fully informed about their options as they move from work into retirement.”
Steve Webb was the pensions minister when the system was announced and is now director of policy at Royal London pensions company.
“If pension savers are putting their money into a bank account on a temporary basis before reinvesting it, then there is less to worry about. But if they simply leave their money in an account paying little or no interest, they will see its real value decline year-after-year through inflation,” he said.
“It is vital that anyone considering taking their money out of their pension pot has access to high quality advice and guidance, which stresses the option of leaving the money invested.”