HM Revenue & Customs has come under fire after admitting it does not know how many people take small pension pots as cash each year.
Under trivial commutation rules, people aged 60 or over with total pension savings worth £18,000 or less may take their fund as cash rather than buying a retirement income product. In addition, savers can take up to two private pension pots worth £2,000 or less as cash.
Hargreaves Lansdown head of pensions research Tom McPhail submitted a Freedom of Information request to HMRC asking for details of the number of people who use trivial commutation rules to take their private pension pot as a lump sum.
In response, HMRC senior business manager Catherine Hunter says HMRC does not have the information as trivial commutation payments did not have to be notified separately through the PAYE process before April 2013.
McPhail says: “This is a shocking omission in HMRC’s record keeping. Trivial commutation has the potential to fix more than one problem in the pension system but we do not know whether it is effective or not because HMRC is failing to keep score.”