Quarter of over 55s unaware of tax on pension savings

I was surprised to read read quite recently that more than one in four (27 per cent) people aged over 55 do not realise that they have to pay tax on pensions savings if they take the money as cash, according to new research from Legal & General (L&G).

L&G’s report, Price of Freedom, highlighted that this could potentially lead to them facing high tax bills than they had prepared for.

It also found that 21 per cent of over 55s would be “shocked” at having to pay tax on their pension savings.

Furthermore, 37 per cent of those who expect to get their savings tax-free think that they wouldn’t have to pay any tax on a lump sum greater than the 25 per cent threshold.

L&G Retail and Retirement Income managing director, commented: “None of us spend as much time as we should thinking about pensions and retirement planning. But leaving important decisions about later life to the last minute could potentially leave you poorer in retirement.

“It might even put the hard-earned pension pot you’ve built up during your working life at risk. Many customers don’t know about some of the fundamental factors that can impact how much money we have in retirement. Tax is one of these.”