Over 12% of over 55s are still planning to cash in their entire pension pot next year, despite warnings

An estimated 200,000 people are considering cashing in their full pension pot next year following recent changes to the pension rules, according to a new survey conducted by Hargreaves Lansdown.

Earlier this year George Osborne announced the radical changes to the pension scheme to ensure that those who had invested into pensions would be able to spend the money as they see fit, including those over 55 being able to take all their money out of their pension funds.

Initial fears that the money which was intended to provide an income during retirement may now be frittered away may also be realised. The report has also highlighted that of those planning to cash their pension in, the money will be spent on DIY, debt repayment and assisting children.

Concerns are rife that with the changes being so drastic and implemented so fast, that pensioners excited by the opportunity to essentially treat their pension like a bank account may be hit by unexpected taxes.

Tax windfall for the government

Estimates reported by the BBC suggest that the government could stand to receive a tax windfall of as much as £1.6bn as a result of the changes, and those considering cashing their pension in apparently unaware of the potential tax charges which could see them pushed into the higher income tax brackets.

Expats planning on cashing their pension may also be dealt a further blow by pension providers who are threatening to refuse to pay the money into foreign accounts, meaning that the pension holder may have to have a British bank account – something which can be notoriously difficult to open.

It is expected that clarity on the new rules will come in the next month or so.

Before you make a decision, get independent advice

From our experience, the levels of confusion amongst expats regarding their pension is causing significant headaches. With more options, such as offshore pension transfers, available exclusively to expats, we have seen a significant rise in those seeking independent advice from advisers in our network.

If you have a UK pension and would like clarity on what the rule changes are likely to mean for you, request a free consultation with an independent financial adviser who will be able to talk you through each of your options.