Pension savers are being overtaxed at record levels when they dip into their retirement pots. More than 200,000 over-55s have clawed back nearly £500 million since pension freedoms were introduced in 2015.

But the taxman is pocketing on average £2,355 too much when retirees make their first withdrawal. This is because HM Revenue & Customs (HMRC) charges them a so-called emergency rate of tax. To get their money back, savers must then fill in a complex, nine-page form, or wait up to a year for a rebate. The amount of tax being reclaimed is at its highest level since the pension freedoms were brought in to allow savers access to their retirement funds without having to buy an annuity (a guaranteed regular income). Latest HMRC figures show around 17,000 people clawed back nearly £47 million in tax between April and June this year alone.  This is compared to £29 million claimed by 14,000 savers in the same three-month period last year. And this does not include the tens of thousands of people who could still be waiting for a rebate. Figures from City watchdog the Financial Conduct Authority (FCA) suggest more than 200,000 people a year risk being overtaxed when making withdrawals from pension savings for the first time.

Pensions scam alert

The FCA and the Pensions Regulator are issuing a new warning against fraud after finding that 42% of pension savers – the equivalent of 5 million people – are at risk of falling for common tactics used by pension scammers. The likelihood of being drawn into one or more scams increased to 60% among those who said they were actively looking for ways to boost their retirement income. Pension cold calls, free pension reviews, claims of guaranteed high returns, exotic investments, time-limited offers and early access to cash before the age of 55 are all ways savers are tempted into risking their retirement income. Yet those who consider themselves smart or financially savvy are just as likely to be persuaded by these tactics as anyone else. Pension savers were tempted by offers of high returns in investments such as overseas property, renewable energy bonds, forestry, storage units or biofuels. Nearly a quarter (23%) of the 45-65-year-olds questioned said they would be likely to pursue these exotic opportunities if offered them. Helping savers to access their pensions early also proved to be a persuasive scam tactic. One in six (17%) 45-54-year-old pension savers said they would be interested in an offer from a company that claimed it could help them get early access to their pension.

Does Sterling’s dive tell the truth about Brexit?

Sterling tumbled towards $1.21 last week as growing concerns about the chances of a disorderly Brexit spurred investors to hedge or slash their exposure to British assets. The pound, its fortunes tied to the years-long process of negotiating Britain’s exit from the European Union, is suffering from signals of panic among investors that the UK is headed for a no-deal Brexit under new Prime Minister Boris Johnson. Financial markets had regarded that eventuality, which many economists believe would severely damage the British economy, as relatively unlikely. The British currency has now shed around 2.4% of its value since Johnson took over last week and is headed for its worst monthly performance since October 2016, not long after the country voted to leave the EU. Sterling traded as high as $1.32 in May. And anecdotally (but no less alarmingly) the pound is already being treated like a volatile emerging markets currency. Last week Edinburgh festival artists refused to be paid in sterling, demanding euros and dollars. Is the the “debauching” of the pound is fully under way?

Financial Advice Including Pension Advice, Bristol

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