HMRC to keep controversial pension freedoms tax ruling
HMRC has steadfastly refused calls to re-think its stance on the taxation of pension freedoms withdrawals.
The UK taxation body has underlined its stance in its latest newsletter stating that – despite calls for change – it will not be revisiting the policy. Under existing rules providers are required to charge 'Month 1' emergency tax the first time someone uses the pension freedoms to access their retirement pot.
This means people who make a single flexible withdrawal from their fund in a tax year receive 1/12th of their usual tax allowances.
Pension and investmest specialists AJ Bell called the stance "a bitter blow to millions of savers" pointing that the pensions industry has been pressing for the Revenue to revisit its approach, while the Office of Tax Simplification (OTS) recently warned rules governing the taxation of pension freedoms withdrawals are "poorly understood" by consumers.