Taxes and welfare cuts hit people taking out retirement savings, says survey

People taking out retirement savings are being caught out by unexpected taxes and welfare reductions, a study shows.

A survey of 500 adults who accessed pensions since new freedoms came into force last year showed that one in 10 had unforeseen tax problems such as deductions, rising to almost a third among those taking their whole pension pot in one go.

Citizens Advice said its research revealed that almost one in three put the money into a bank account, a similar number used the cash for daily living costs while others paid off debts.

Chief executive of Citizens Advice, Gillian Guy, said: "The pension freedoms are popular with consumers but some people are experiencing unexpected losses.

"The changes are giving huge numbers of people the choice of how to access their retirement savings, offering them more options about how to use the money to best fit their lives.

"In a minority of cases people are being caught out by unexpected consequences of using the pension freedoms, such as being hit by tax deductions or a cut to their benefits."

A Government spokesman said: "This Government remains committed to pension freedoms: giving people the choice over how they use their hard-earned savings.

"We understand that accessing your pension is an important decision. That is why we created Pension Wise to offer free and impartial guidance to consumers so they fully understand the options available to them."