Pension allowance charges increase

The number of savers hit by pension allowance charges has rocketed in the past year, new figures show. More than 37,000 people were hit with annual allowance charges in 2017/18, double the number recorded in the previous year, according HM Revenue and Customs (HMRC). The data shows that 26,550 people have reported contributions worth £812 million over the annual allowance. This means that on average, those above the allowance face paying tax on an excess contribution of around £30,600.

Pension experts have blamed the rise in breaches on the taper introduced in 2016. This meant that anyone earning over £150,000 had the amount they can save into a pension each year reduced. Twice as many people were hit with an annual allowance charge in 2017/18 compared with the previous tax year, with hundreds of millions snatched from the grasp of savers. The culprits behind this spike in pension tax are thought to be the taper, which lowers the annual allowance for high earners, and the money purchase annual allowance (MPAA), which penalises those who take taxable income from their retirement pot.

 

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