More than half (53 per cent) of retirement savers are unsure of the tax rules surrounding pension freedoms.
According to research from Employee Benefits consultancy Portus, 53 per cent of retirement savers are uncertain about the taxation of pensions with only 26 per cent being aware that they can take a quarter of their pension fund tax-free.
A survey of 1,080 employees in October 2015 found that while 54 per cent of the over 55s are aware they can take a tax free lump sum before being subject to tax, 31 per cent of those in the age group don’t know what the tax implications are.
Steve Watson, Portus commercial director, said: “Pension freedoms have been widely welcomed in that it gives people more control over how they use their own money.
“However, our research shows that more needs to educate people about the changes and employers should take a lead.”
Last month HM Revenue & Customs statistics showed providers have paid out £2.7bn since the pension freedoms came into force.
A total of 146,000 people accessed their pension pots through 251,000 payments between April and September.
Over £1.5bn was paid out to 84,000 savers between April and June and just under £1.2bn to 81,000 people received between July and September.
The figures were sparse on detail though, with no breakdown in terms of the ways which savers had accessed the money or clarity about how much had been withdrawn as lump sums or via flexi-access drawdown.
HMRC added that it had no comparative data from this time last year and could not say how much tax was collected as a result of the pension withdrawals.
Paul Holiday, independent financial adviser at Greensky Wealth Ltd, said a lot of people that have cashed in their fund and it has been a confusing process for them.
He said: “Some of them have just paid the tax and been given a refund and others have just received a lump sum of money.
“My Mum decided to cash in her fund and had to fill in a form and was still waiting for the money three months down the line.
“I don’t know if this is something that happens locally, but people talk to one another. Some people get the right amount straight away, and others don’t which creates a sense of confusion.
“Pension providers also have different ways that they pay out money so some people will end up over-paying tax and may not be aware of this, and that they can actually claim it back.”
