Takings from 55% pensions super tax up 24% to £41m

Savers who breach the Lifetime Allowance face charges on the amount that exceeds the limit, charged at 55% if the amount is taken as a lump sum.

580 people were caught out by HMRC’s 55% pensions super tax last year, up from 560 in 2015/16.

The LTA was reduced from £1.5m to £1.25m in 2014/15 and then further to £1m in 2016/17. For the 2018/19 tax year, the LTA has been increased to £1.03m.

Tim Holmes, managing director at Salisbury House Wealth, said: “It’s no longer just the super-rich that are being caught by this super tax. A lot of middle England that wouldn’t normally see themselves as particularly affluent are also at risk.

“Savers need to make sure that they really need to withdraw a lump sum from their pension before doing so as it could lead to a very costly charge if they are not on top of their pension pot levels.

“The reduction of the LTA to £1m has seen a surge in the number of people being hit by the tax.

“As well as keeping a close eye on the growth of their pension pots, savers should consider alternative saving options such as ISAs. This will allow them to continue to make investments without having to worry about being caught out by the highly punitive LTA levy.”