Pension freedoms generate £900m for Treasury

HM-Treasury-Front-700x450.jpgTaxes generated by the pension freedoms are almost 30 per cent higher than forecast, according to figures from the Office for Budget Responsibility.

In the OBR’s economic and fiscal outlook, released yesterday alongside the Budget, the economists said Treasury coffers were boosted by £900m as a result of the reforms.

The sum is a 28 per cent increase on the OBR’s original forecast of £700m for 2015/16.

It comes after HM Revenue & Customs revealed it had repaid more than £24m to people who were overtaxed after withdrawing money from their pension savings in the last three months of 2015.

A total of £24.1m was repaid following 10,973 claims from taxpayers between October and December last year who had overpaid tax on pension withdrawals because the money taken out was taxed using an emergency tax code.

At the same time, the OBR said spending on state pensions as a proportion of GDP had reduced by 0.2 per cent, which it attributed to increases in the retirement age.

The OBR added: “In contrast to working-age benefits, the basic state pension award is expected to rise mainly in line with earnings due to the triple lock on uprating, so average awards have little effect on state pension spending as a share of GDP.

“Indeed, with awards rising by 2.5 per cent in 2017/18 – higher than CPI inflation or average earnings – average awards push spending up slightly as a share of GDP.”