A freedom of information (FOI) request made by Royal London has found that 7,000 people reported on their tax return that they had saved more than the £40,000 (€46,274, $49,163) limit in 2014/15. This was a 79% increase from 2012/13 when 3,900 breached the-then allowance of £50,000.
Royal London predicted that the number of breaches is likely to rise further for 2016/17 following the introduction of the taper annual allowance which cuts the annual allowance by £1 for every £2 earned by people with income of over £150,000, with a maximum reduction of £30,000.
This means for those people with incomes of over £210,000 their annual allowance will be £10,000.
Meanwhile, from 6 April any unused allowances from three years previously can be carried forward and the insurer warned that people would be unaware of how much unused allowance they had from 2013/14 when the allowance was higher.
Royal London policy director Steve Webb said: “Pension tax relief has been squeezed year after year, and these new figures reveal a big growth in the numbers paying a tax penalty for being over the annual allowance limit.”
“With a big cut in annual allowances for high earners in 2016/17, many more people risk breaching the limit unless they cut back on their contributions or use up unused allowances from earlier years,” he added.
