Approximately 60,000 people could fall prey to the higher rate tax bracket from next April, Andrew Tully, pensions technical director at MGM Advantage, has warned.
Speaking ahead of new pension freedoms coming in from April 2015, he said: “One of my concerns, even with conservative estimates, is that many people could find themselves being dragged into the higher tax bracket and the self-assessment tax system for the first time.
“This could mean people either pay too little or too much tax. There is also the potential for hefty HMRC fines for people who do not complete their self-assessment on time.”
According to research done by the retirement income firm, there was a concerning lack of understanding about the implications for taking the whole pension pot as cash, with 59 per cent over 55-year-olds saying they did not understand the tax implications.
Graeme Inglis, director of Kirkcaldy-based Create and Prosper Financial Services, said: “This confirms the need for advice, anyone at retirement should seek advice. The guidance guarantee is importan,t but it is the first stage in the process.
“One thing we are expecting is innovation in the product market, so we are in many ways stuck in limbo. We can only wait and see if the issue will be used as a political football. Advisers are taking this into consideration and telling people to defer decisions until next year.”