People planning to take their whole pension pot as cash rethink their decisions once the tax consequences of withdrawing over 25 per cent are explained, research shows.
In a YouGov survey of 1,500 54-to-65-year-olds, 17 per cent said they would take their whole pension in one go. However, this drops to 11 per cent after they are informed of the tax consequences.
Government-backed guidance service Pension Wise will explain to users how tax interacts with pensions but will not do calculations.
The survey, commissioned by Just Retirement and SavvyWoman, reveals the extent of the public’s lack of understanding of tax.
Almost one in ten (8 per cent) think all pension withdrawals are tax-free, while 16 per cent believe only 25 per cent is taxable.
Just over seven in ten (72 per cent) say it is “shocking” that average earners can only take a £17,850 lump sum before starting to pay higher rate tax.
And 68 per cent say the Government did not make the tax situation clear in its reform announcements.