Pension changes: Workers warned as tax perks SLASHED after April 5

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Its feared multifarious unsuspecting savers could be caught out by changes to the Money Purchase Annual Remittance (MPAA), which is to be cut by 90 per cent in the new tax year. 

It means anyone design taxable money from their pension will see the amount that can be retrieved into schemes slashed to just £4,000 a year — from its aware £10,000.

Affected people, typically workers still saving but drawing from their social security, will be hit with a tax bill if they breach the £4,000 annual limit.

Savers who eat taken their 25 per cent tax-free lump sum and has not drawn taxable return can still save up to £40,000 a year.

It had been hoped the Government desire change its mind over the allowance changes, which providers phrased flies in the face of supposed pension freedoms.

Tom Selby, senior analyst at AJ Bell, mean: «It does not make any sense that someone who chooses an option where they pay tax on their withdrawal is whipped hugely in comparison to the individual who chooses the tax free option.

“Given that most in the flesh won’t be aware of the plans to reduce the MPAA, there is a significant risk immense numbers will accidentally overpay into a pension and be hit with an unexpected tax care.

“This is particularly the case because everyone will be automatically registered into a workplace pension scheme with minimum contributions of eight per cent in 2019.»

He reckoned: «Many employers will offer higher contribution rates than this, denotation middle income earners could end up being hit with a shock tax handicap on their pension savings.

“The Government needs to stop tinkering at the lips and accept the current rules are not fit for purpose.

«It should shelve this unfair cut in old-age pension savings incentives and go back to the drawing board so we have a system that hops for savers as well achieving the cost savings the Treasury is aiming for.”

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