New Citizens Advice report released
A new report by Citizens Advice has found that some people accessing their retirement savings are being caught out by unexpected taxes and welfare reductions.
The new figures reveal that overall 9% of people had unforeseen tax problems - such as tax deductions they weren’t expecting, this rises to 30% among people who took their whole pension pot in one go.
The research also found that 6% of people using the freedoms faced unexpected issues with their benefits, such a reduction in welfare payments and 11% of people with pension pots worth less than £20,000 say they have faced unexpected issues with their benefits.
The report shows that the pension freedoms introduced in April 2015 are popular as people feel they can make their retirement savings work for their own circumstances. Over a third (35%) of people using the pension freedoms believe it has directly improved their retirement prospects.
Among those who say they are better off following the introduction of pension freedoms, a majority (77%) say this is because they have more control over their money and half (50%) say the freedoms mean they can make the most of their healthy years in retirement.
The new research, based on a poll of over 500 people who have accessed their pension since the freedoms were introduced, worryingly found that nearly three in ten (29%) people are using the money to pay for daily living costs.
Comments from Citizens Advice Chief Executive
Chief Executive of Citizens Advice Gillian Guy said:
'The changes are giving huge numbers of people the choice of how to access their retirement savings, offering them more options about how to use the money to best fit their lives. Many are opting to manage their savings themselves, through bank accounts or investments. Others are taking the opportunity to clear debts which would otherwise hang over their retirement.
'In a minority of cases people are being caught out by unexpected consequences of using the pension freedoms, such a being hit by tax deductions or a cut to their benefits. As people’s pension choices become more complicated government and providers need to continue their work to promote free Pension Wise guidance, ensuring people are fully informed about their options as they move from work into retirement.’
Our free Benefits Calculator can help you check your welfare benefit entitlements and tax credits. Even if you have checked before, it is worth checking again, especially if there has been a change in your circumstances.
You can also use our Grants Search to find out if you are eligible for a charitable grant, or other support. If you are worried about any issues and would like further advice, you can use our Find an Adviser tool to locate face-to-face advice in your local area.