The Treasury has raised £1.2 billion more than it initially expected from pension freedoms last year, according to documents released alongside the Budget today.
Following its introduction in 2015, the government expected the policy to raise £300 million in 2015/16 rising to £600 million in 2016/17, the document said.
However the policy has raised £1.5 billion in 2015/16 and its latest estimate for 2016/17 is £1.1 billion.
The government said the revised tax benefits for the government have been caused by individuals withdrawing more money over a shorter period of time.
The document also said the data from HM Revenue & Customs (HMRC) points to individuals taking out more out than they would have received after buying an annuity, meaning they had a higher taxable income.
‘We now expect the measure to bring in £1.6 billion in 2017-18 and around £900 million a year for the remainder of the forecast,’ the government said.
Vince Smith-Hughes, director of specialist business support at Prudential, said the figures are potentially worrying if they indicate people have withdrawn more than expected from their savings.
'It is clear from this data that the tax take from pension freedoms is considerably higher than originally expected – this having been caused by larger withdrawals – including in some cases all of the fund being withdrawn in one go,' he said.
'This may be right for some people who have other income sources, - but clearly is a concern if unsustainable levels of income are being taken by others where the income from the pension is critical to maintaining a reasonable standard of living.'