Number of savers hit with AA charges rises 57%

The number of pension savers that were hit with annual allowance (AA) charges in 2017/18 increased year-on-year from 23,800 to 37,300, the latest HMRC figures have revealed.

The statistics showed that £173m has already been paid by more than 10,000 savers in AA charges during the year.

Furthermore, 26,550 people have reported contributions worth £812m over the AA through self-assessment, which will be subject to a tax charge.

More than 4,500 people paid £185m in lifetime allowance charges during the period, up from 3,350 paying £144m in 2016/17.

AJ Bell senior analyst, Tom Selby, said that the “staggering impact” of the government’s “pension tax grab” was evident in the new figures.

He continued: “The culprits behind this spike in pension tax are almost certainly the taper, which lowers the annual allowance for high earners, and the money purchase annual allowance (MPAA), which penalises those who take taxable income from their retirement pot.

“The lifetime allowance also continues to hit ever larger swathes of people, with 4,550 individuals coughing up £185m in lifetime allowance charges in 2017/18.”

HMRC’s statistics also revealed that personal pension contributions increased by £800m to £28.2bn, although the annual average contribution per member declined from £2,900 to £2,700.

The number of members contributing to a personal pension has increased to 10.4 million.

Commenting, Buck head of DC wealth, Mark Pemberthy, said: “It’s encouraging to see that today’s figures show pension participation continues to move in a positive direction.

“More people than ever are participating in their workplace pension schemes and it’s clear that auto-enrolment is having a positive impact on the overall DC pension landscape and people’s pension savings.

“However, while a greater number of employees are putting money aside for their retirement, these figures also show that most people are continuing to chronically underfund their retirement.”

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