More than 1,000 pension savers became subject to the Money Purchase Annual Allowance (MPAA) every working day last year, according to analysis of recent HMRC figures by Just Group.

The group found that 260,000 pension savers took a taxable pension payment in 2020, meaning that a total of 1.6 million people have been subject to the “stringent” tax rules in the five years since they were introduced.

The provider warned that the MPAA can “severely reduce” people’s future contributions, also warning that the “majority” of people taking a flexible payment from their pension do not use the Pension Wise guidance service created to help inform them of their options.

Commenting on the analysis, Just Group group communications director, Stephen Lowe, stated: “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 Financial Conduct Authority (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.”

He added: “Automatic enrolment into workplace pensions has dramatically increased the number of pension savers.

"It is a logical step to stream those pension savers into guidance ahead of them becoming eligible to access their pension savings so they understand the pros and cons of each option.

"That is the best way to ensure they can make informed decisions now without regretting their choices later.”

Industry experts, including former Pensions Minister, Ros Altmann, have previously called on the government to scrap the MPAA, with HMRC figures on flexible pension withdrawals , alongside concerns over the impact of Covid-19, further compounding these calls for action.

Share Story: