More than 1,000 pension savers were captured by the Money Purchase Annual Allowance (MPAA) every working day last year, new analysis by JustGroup has revealed.
According to the retirement specialist, 260,000 pension savers took their first taxable pension payment in 2020, bringing the total number of individuals affected by the MPAA to 1.6 million in the past five years.
The MPAA, introduced alongside the pension freedoms in 2015, reduces the amount pension savers can continue to contribute to their pension each year to £4,000 from the usual £40,000 annual allowance.
JustGroup warned that not enough individuals were using the free, impartial advice on offer from Pension Wise to help inform them of their options and alert them to potential pitfalls.
Stephen Lowe, group communications director, JustGroup, said: “Taking a flexible payment is fine if you understand the rules and it is part of your financial plan but many people will not have pored over the small print of the tax rules or understand the extra administrative responsibilities. Those who simply dipped into their pension to get them through a tough patch intending to make up their pension savings later could be in for a nasty surprise.
“This is just one example of why it’s essential the FCA takes strong action to ensure that as a starting point, the vast majority of pension savers receive the benefits of free, independent and impartial guidance offered by Pension Wise.”