The amount of tax collected by the taxman from savers exceeding their lifetime allowance rose 80% in the last year, Salisbury House Wealth has found.
According to data from HM Revenue & Customs the amount of tax it collected from such savers rose from £20m in 2014/15 to £36m in 2015/16, the adviser said. This means the tax take has tripled from the £12m collected in 2012/13, it added.
The lifetime allowance is the maximum amount of money a saver can save into their pension pot before incurring an additional tax charge of up to 55%. The allowance was reduced to £1m in April 2016.
The amount of tax collected from those who breached the lifetime allowance rose 276% between 2010, when former chancellor George Osborne took up the role, and 2015, when pension freedoms were put in place.
Salisbury House Wealth managing director Tim Holmes said: “An increasing number of taxpayers who have done the responsible thing and saved for retirement are being caught out by this super tax trap.
“Many of these individuals are not particularly high earners. Often this is totally unexpected – and can be incredibly damaging to retirement plans.”
He warned savers to monitor pension pot growth “extremely carefully”, which includes keeping track of investment performance as well as their own contributions. Some savers may want to consider alternative saving options such as an ISA, he added.
The Centre for Policy Studies (CPS), renewed calls for the government to scrap the lifetime allowance in its Pensions and Savings Manifesto published in May, arguing that it would encourage people to save more into their pension.
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