More than 90% (91%) of employers believe that employees do not understand the tax rules when withdrawing money from their pension, revealed a poll conducted by WEALTH at work.
According to this figure, this lack of understanding surrounding pension tax could result in many savers “losing out”.
WEALTH at work director Jonathan Watts-Lay highlighted that the findings could mean that many employees will pay more than they need to at-retirement, “ultimately resulting in less income” in retirement than what could have otherwise been achieved.
“The Office for Budget Responsibility reported in October that the Treasury will net an extra £400m in revenues raised from the pension freedoms in the 2018/19 tax year, which is 50% more than forecast - indicating that individuals are in fact, paying tax when it could have been avoided,” he said.
Watts-Lay emphasised the importance of employees needing to understand the tax implications around accessing their retirement savings, adding that “many do not realise” that they could “reduce or eliminate” tax charges on their retirement income by utilising the tax allowances and reliefs available.
“I believe that all employees and members should receive support before they take any income from their pensions or indeed any other sources of retirement income – whether that is financial education or guidance, or even regulated advice for more complex decisions.
“It’s now becoming widely recognised that there are specialist providers available to deliver these services to help employees and members to make informed decisions at-retirement. However, there is still a long way to go to ensure that all individuals are receiving the support that they deserve,” he concluded.
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