Osborne set for pension freedoms tax windfall

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The Treasury will gain more than double its original forecast in boosted tax revenue from the pension freedom reforms, according to figures from Hargreaves Lansdown.

The Government originally estimated the freedoms would generate a £320m gain in its tax take in 2015/16, but Hargreaves says the true figure could be near £700m.

Hargreaves Lansdown head of pensions research Tom McPhail says: “It looks as if the Chancellor could be in for a handy windfall, thanks to his pension reforms.

“It is important to bear in mind though that this will simply bring forward tax revenues and consumer spending which would otherwise have been paid out over the years and decades to come.

“It also underlines the importance of maintaining a stable pension system which continues to encourage and reward responsible long-term savings habits.”

In addition, the firm says it will be difficult to ascertain the true scale of the tax take in the early months of pensions freedom. This is because many savers will be taxed under an emergency code, and therefore overpay, while others seeking to cash in may be thwarted by their provider’s inability to comply with payment requests.

The sums contrast with figures from consultancy Hymans Robertson, which has estimated even bigger gains for the Government at an estimated total of £1.2bn for 2015/16.