The number of people who have exceeded the annual allowance for pension tax relief has risen dramatically in recent years and is likely to increase as the limit undergoes further cuts.
Between the 2012/13 and 2014/15 tax years the number of people who breached the annual allowance rose by 79 per cent, according to a Freedom of Information request tabled by Royal London.
Around 3,900 people saved more than the limit in 2012/13 when the allowance was £50,000, while 7,000 people breached the limit in2014/15 when the annual allowance had been cut to £40,000.
The number of people who pass the annual allowance is likely to rise even further in 2016/17 when the limit is cut to £10,000.
Royal London policy director Steve Webb said the consumers will have to make significant cuts to their contributions in order to avoid going over the limit in the upcoming end of tax year.
“Pension tax relief has been squeezed year after year, and these new figures reveal a big growth in the numbers paying a tax penalty for being over the annual allowance limit. With a big cut in annual allowances for high earners in 2016/17, many more people risk breaching the limit unless they cut back on their contributions or use up unused allowances from earlier years."
Savers should be aware of any unused allowances from previous years, as annual allowances can be carried forward from up to three earlier tax years when the limits were £50,000 and £40,000.
Mr Webb encouraged individuals to look back at previous tax returns to see if they can take advantage of any leftover annual allowance.
“Savers have just a few weeks to use up spare allowances from 2013/14. It is worth anyone in this position finding out urgently how much they have spare from earlier years and to take impartial advice to help them plan the right level of pension contributions before the end of this tax year,” Mr Webb said.