Pension Freedom Earns £2 Billion for Government

Figures released for yesterday’s 2017 Spring Budget show that the Government has made a lot more money than expected from the introduction of Pension Freedoms (where people can cash in their pension earlier than they previously could). The tax raised from the initiative was £1.7 billion more than initially forecast.

MoneyMarketing reports

“…the Government initially estimated it would raise £300m in 2015/16 and £600m in 2016/17. However, £1.5bn was actually raised in 2015/16 and the latest estimate for 2016/17 is £1.1bn… The Government is now expecting this year to be the “peak year” of yield rather than 2018/19… The document adds: “HMRC data also suggests the average tax rate on withdrawals might be higher than originally expected. Some individuals are taking larger amounts than they would have been able to purchase through an annuity, thereby creating a higher tax liability.” …The Treasury document says pension freedoms are now expected to bring in £1.6bn in 2017/18 and around £900m each year for the remainder of the forecast.”