MOST over-55s are oblivious to a tax bombshell when reaching for their pension pots. Nearly nine in 10 of over-55s are unaware they will face an income tax bill when taking out a cash lump sum under the new pension freedom rules introduced by the Government, according to new research. What’s more, in most cases you will end up paying more tax initially and having to claim it back as HMRC will apply an emergency tax code.

The new study, which questioned 2000 people over the age of 55 across the UK, found that 85 per cent thought the Government had failed to communicate sufficiently that they will incur income tax on 75 per cent of their pension by withdrawing their pot for cash from 6th April.

Despite much confusion, appetite to take out a lump sum is high. One in three people (33 per cent) said they planned to take advantage of the new rules and take out considerable sums, not knowing about the tax they will pay. The figures suggest that millions of people across the UK are opting to exercise the new rules, unaware that the pension funds they have built up over many years of hard work will be raided by tax charges.

Many consumers will feel annoyed learning that, having paid high tax bills throughout their working lives, taking out a cash lump sum from their pension pot could leave them with less than expected in their pocket. This lack of awareness emphasises the need to seek professional advice of wealth planners who can support people in setting their objectives for retirement and planning on how they can get there.

When made aware of the new rules and implications of high tax bills, retirees were asked what actions they would take with regard to their pension. One in three said they did not know what they will do when new freedoms come into force, highlighting the importance of services such as the Government’s newly-established ‘Pension Wise’ guidance service and financial advice in helping people understand their choices.

Despite much negative coverage, a further third of people thought annuities were the best route for people’s retirement savings.

The research also found that couples believe the pension freedom makes them better off. Nearly half of married couples said they supported the changes allowing more freedom to take their pension as cash.

However, couples should be cautious when making the decision to take a lump sum without thinking of the long-term implications for their future.

There is much evidence that life expectancy of couples is longer than individuals so rather than making rash decisions right now, couples should be taking more consideration for the future and the fact that the average life expectancy is higher than for individuals.

The raft of changes that came into force on 6th April means more people may need to seek advice from wealth planners to help make crucial long-term savings decisions.

You can get in touch with Billy by calling his freephone number: 0800 321 3508. Or you can reach him via the website,, where there is a contact page, or email him directly: