Displaying items by tag: HMRC

Pension savers lost out on £600m last year according to HMRC personal pension statistics released today.

Flexible pensions cash may be a major contributor to the rise in savings deposits – rather than a rise in consumers saving more, new research has suggested.

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Retirees withdrawing cash appeared to be acting with caution due to market volatility and were found to be using savings accounts as a “haven”, according to the latest statistics. 



HMRC revealed that both the volume and value of flexible payments from pensions has hit a new high.

Between April and June this year, £2.75bn was withdrawn from pensions flexibly, with 760,000 payments made.

Over the same quarter, statistics from the Bank of England noted £7.5bn was deposited into accounts that are accessible without penalty, which includes easy access accounts.

According to the latest research by Moneyfacts.co.uk, savers who have waited until now to open an account may have missed the boat on the most lucrative easy access rates, as they are now on the decline. 



 

Moneyfacts says retirees who want frequent access to use their savings pot as a source of income will “need to be mindful that the best easy access deals can apply withdrawal restrictions or require savers to open the account online”.

Savers will also find that the market average rate of 0.64% is less than the Bank of England base rate, so there are still many accounts to avoid due to poor returns.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Retirees may be withdrawing cash from their pensions for various reasons, either to plug a debt gap, boost disposable income or even to reinvest.

“There are signs that the cash could be going into easy access accounts, away from stock market volatility and within easy reach. In recent months, several providers have cut their easy access rates, plus some of the top deals include withdrawal restrictions.

“The downside to choosing an easy access account is the return, which is variable and may well drop should we see a base rate cut before the year is out.

“As the average easy access rate stands at just 0.64%, it’s clear to see that there are much worse rates out there for savers than can be found in the top rate tables.

“Indeed, the Flexible Saver from HSBC pays a disappointing 0.15% – 10 times less than the top rate in the market today on offer from Virgin Money, which pays a rate of 1.50% on its Double Take E-Saver.

“It is slightly worrying to find such a large rise to both the volume and value of pension cash withdrawals, hitting a new record since pension freedoms were introduced. If retirees take too much cash out of their pensions from the age of 55, they may end up with little provision for the future, which they are unlikely to be able to recoup. 

“Seeking independent financial advice, both when withdrawing cash and choosing a product in which to invest, is essential during a period of economic uncertainty.

“Taking out an easy access account may be an easy choice, but it doesn’t necessarily mean it’s the right one.” 

HMRC has won a £40m legal case against tax avoidance scheme promoter Hyrax Resourcing Ltd.

A recently-published court ruling could open HMRC up to new claims from investors who accidentally lose lifetime allowance ‘protection’ by forgetting to stop paying contributions to their schemes.

2018 has been a quiet year in the world of pensions - no seismic changes or hacking of allowances makes for welcome relief.

The basic premise on contributions made to pensions is that once the money has gone in, you can’t get it out again until you reach retirement age (or earlier ill health or death). There are very few circumstances when exceptions can be made, and if a refund is made other than as permitted by HMRC, then it would be classed as an unauthorised payment with charges totalling up to 70% of the amount refunded.

Pension withdrawals continued to soar in the third quarter of 2018 leading to suggestions that some pensions savers are treating their pensions like bank accounts, dipping in to withdraw cash when they need it.

A record £2.3bn was taken out of pensions pots under Pension Freedoms rules in the second quarter of 2018, HMRC figures have revealed.

Royal London director of policy Steve Webb has called for an end to what he called the “absurd” way pension withdrawals are taxed.

HMRC has taken down a web page, which allows users to check how much money they can put into a pension, after “blunders” were spotted by tax experts at Royal London.