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‘Tax trance’ warning as 50,000 prepare to cash-in pensions

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.”

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Nothing here that we don’t know already. In the vast majority of cases, best advice (as a conclusion of an overall review of a client’s circumstances) is likely be NOT to cash in and, given that such advice will need to be paid for, most clients who want just to cash in will probably be unwilling to pay a fee anyway. So send them on their way and avoid the almost inevitable complaint that will otherwise follow a year or two down the line.

  2. Julian, send them to Pension Wise!

  3. Much as I feel that protecting the weak and vulnerable is my responsibility as a caring citizen, the ignorant and stupid can look after themselves.

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