One in eight people over 55 are planning to take more than the 25 per cent tax-free cash when they are given unfettered access to their pensions from 6 April.
A survey of 1,000 people over 55 and not yet retired commissioned by MGM Advantage found 13 per cent of people, equating to about 50,000 savers, risk being hit by hefty tax bills by taking more than a quarter of their pot as cash.
However, 60 per cent said they would not cash in their pot, with 40 per cent of those saying they did not need the money immediately and 29 per cent wanting to keep it invested. In addition, 27 per cent are undecided about what to do with their savings.
MGM Advantage pensions technical director Andrew Tully says: “Depending on their circumstance, those opting to take the cash could easily find themselves paying significant amounts of tax.
“These people should be wary of falling into a state of ‘tax trance’; transfixed by the prospect of a lump sum of cash and either untroubled by the prospect of paying more tax or unaware of the tax bills they’ll face in doing so.”