The government has no hard evidence that people are using the money purchase annual allowance to recycle tax relief, despite its decision to slash the allowance by 60 per cent to stamp out this practice, FTAdviser can reveal.
The revelation, obtained through a Freedom of Information request with HM Revenue & Customs, comes just two weeks before the new rules are due to come into force.
The money purchase annual allowance (MPAA) was introduced in 2015 to prevent people drawing down on their taxable pension, then funneling the money back into their pension and claiming the extra tax relief.
It was originally set at £10,000 a year, but chancellor Philip Hammond announced in his Autumn Statement last year that it would be reduced to £4,000.
The government claimed the move would save £65m in the first year, and £70m a year thereafter.
However, it did not reveal in either the Autumn Statement or the Spring Budget papers how it arrived at these figures.
FTAdviser launched a Freedom of Information request with HMRC requesting details of how many people were simultaneously drawing down on and contributing to a pension.
An HMRC spokesperson responded: "Following a search of our paper and electronic records, I have established that HMRC does not hold the information within the scope of your request.
"MPAA was introduced in April 2015 and there is currently only limited data on those who have accessed their pensions flexibly.
"We are not able to identify the number of individuals who are both accessing and concurrently saving into a pension."
A HM Treasury spokesperson said the £65m savings expected in the coming year as a result of the reduction was based on data from HMRC's Survey of Personal Income, and the Office for National Statistics.
The spokesperson stressed that all budget costings were independently certified by the Office for Budget Responsibility.
Steve Webb, director of policy at Royal London and former pensions minister, described the decision to press ahead with the reduction to the MPAA as "shocking".
"It has the feeling of policy-making by anecdote," he said.
"I don't think anybody doubts there were people out there putting in more than £4,000 a year into their pension under MPAA rules. But I don't think there was any evidence that it was growing or that it was a problem.
"It's regrettable to have policy-making based on so little evidence," he said.
Richard Parkin, head of pensions policy at Fidelity International, said the government's decision was "galling".
"Given the industry is united in its opposition to the change, and is willing to put forward alternatives, it's really disappointing that they've ignored us.
"It's particularly frustrating that they don't have any evidence of the loophole being used," he said.
Mr Parkin predicted the new rule would have the greatest impact on people on medium incomes with a good workplace pension, who inadvertently drawdown on another pension, unaware that this will trigger the MPAA.
He said wealthier people were less likely to be caught by the rule.
