An increasing number of people saving for retirement have been hit by tax charges for exceeding the amount they are allowed to put away tax-free.
In total, 26,550 people exceeded their pension allowance in 2017-18, with the overall value of excess contributions reaching £812 million and averaging £30,584 per person.
The number of people exceeding their pensions allowance has seen a steep increase over the last decade of around 11,000 per cent, with just 230 people having done so ten years earlier.
Tax charges for exceeding the relevant pensions allowance vary between 40 and 45 per cent.
Depending on a person’s circumstances, one of three different pension allowances can apply. These are the money purchase annual allowance of just £4,000 for people who have flexibly accessed their savings, the standard £40,000 annual allowance and the tapered annual allowance for people on incomes of more than £150,000 a year.
The tapered annual allowance sees a £1 reduction in annual allowance for every £2 of income above £150,000 a year.
The figures from HM Revenue & Customs (HMRC) do not break down the proportion in which the different allowances have been exceeded.
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