However, although this represents a minority, MGM Advantage warns that the temptation of cash lump sums puts up to 50,000 people at risk of falling into a ‘tax trance’ after April 6th.
The research, carried out by ComRes, reveals that 60% of respondents will not take advantage of the new freedoms and cash in their pension pots, with a further 27% undecided. Those over 55s who were not intending to make use of the freedoms said they either did not need the money now (40%) or wanted to keep their pension invested and draw from it when needed (29%).
Andrew Tully, pensions technical director at MGM Advantage, said:
‘The new freedoms have opened up many more options for those approaching retirement, but just because those options are available, it doesn’t mean taking them up is necessarily an attractive option or the right thing to do.
Tax issues are a concern for some retirees, with 16% of those not taking cash above the tax free limit citing the desire not to pay extra tax when drawing money. 1 in 5 (19%) of people not taking the cash above the tax free limit stated that, instead of taking all their money in cash, they would look to secure a lifetime income with their pension savings.
Andrew Tully continued: ‘Although the majority of people appear to be taking a measured approach, just over one in eight will take their money and run. Given the number of people in the UK retiring each year, that could equate to over 50,000 people. 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.
‘More freedom and choice represents an excellent opportunity for consumers, but also means more complexity and responsibility. It’s vital that consumers have the information they need to make the best decision for them. The government’s Pension Wise service is a good start, but professional financial advice is also key in helping people find the right approach for their individual circumstances.’
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