The Liberal Democrats are calling for the government to introduce a cooling off period for people who take more than the minimum lump sum from their pension pot without taking financial advice.
Currently, withdrawals over the 25 per cent minimum are taxed at an emergency tax rate, which can lead to pensioners paying too much tax.
Liberal Democrat spokesman for work and pensions Stephen Lloyd has written to the secretary of state for work and pensions Esther McVey asking for a thirty-day cooling off period for retirees who have not taken advice to ensure they are fully aware of their tax liability before making a decision.
The news comes after the Office for Tax Simplification published a review of the taxation of savings income highlighting this issue, and advice firms such as LEBC have proposed a mandatory waiting time.
Lloyd says: “The pensions freedoms have enabled many people across the country to better plan for their retirement, but the legislation was always intended to be a work in progress, the cold calling ban and this cooling off period are the next logical steps.”