The taxman took £500 million less from pension freedom withdrawals than had been expected, the Office for Budget Responsibility (OBR) has revealed.
It was initially estimated the pension freedoms would raise around £300 million in 2015-16 and £600 million in 2016-17.
At the time of the 2017 Spring Budget in March, the OBT updated its predicted tax take on pension freedoms withdrawals to £1.6 billion in 2017-18 (£1.1 billion in 2016-17 and £1.5 billion in 2015-16).
However, in a fresh forecast published alongside today’s Autumn Budget the OBR said the tax take would be lower than expected for the current 2017-18 tax year.
It said: ‘Tax from occupational pensions has been weaker than expected, with tax from pension flexibility withdrawals flat on a year earlier, around £0.5 billion lower than our March estimate. This may reflect individuals spreading their withdrawals over a shorter period than we had previously assumed'.
The OBR said this result ‘may reflect individuals spreading their withdrawals over a shorter period than we had previously assumed’.
In March it had observed some individuals were taking larger amounts than they would have been able to purchase through an annuity, thereby creating a higher tax liability.