The government will net an extra £400m in tax from pension freedoms over 2018/19, taking its total yield to £1.3bn for the year, according to latest figures from the Office for Budget Responsibility (OBR).
In a document published alongside this Budget yesterday, 29 October, the OBR said it upped its intake for the year as “earlier cohorts are drawing down their pensions for longer”.
Originally, OBR factored a tax take of £900m over 2018/19 in the 2017 Spring Budget, after the measure brought in £1.6bn over 2017/18.
AJ Bell senior analyst, Tom Selby, said: “The OBR says this is because ‘earlier cohorts are drawing down their pensions for longer’. This could be explained by the fact buoyant stock markets have allowed savers to take income from their pensions for longer than expected. Alternatively, the OBR’s initial guess may simply have been wrong.
“Either way, there is no doubt the policy has been hugely successful from the Treasury’s perspective, both in boosting the attractiveness of pensions and raising additional tax revenue.”
According to AJ Bell, the latest figures take the total revenue raised by the policy to £5.5bn.
Earlier this month, the Pensions Policy Institute said that pension freedoms and choice could result in a tax revenue increase of £19bn over the next 10 years due to the way individuals have been accessing their savings.