New calculations have suggested the Treasury will get an extra tax take of around £700 million this year as a result of the pension reforms.
Current HMRC data is likely to be inaccurate, with a £320 million boost to tax revenue probably being half the true total, according to Hargreaves Lansdown.

The firm’s numbers crunchers have examined the first two months of pension freedoms to come up with the figures and laid out in detail this morning how they had come to the conclusion.

Tom McPhail, head of pensions research at Hargreaves Lansdown, said: “It looks as if the Chancellor could be in for a handy windfall, thanks to his pension reforms. It is important to bear in mind though that this will simply bring forward tax revenues and consumer spending which would otherwise have been paid out over the years and decades to come.

“It also underlines the importance of maintaining a stable pension system which continues to encourage and reward responsible long-term savings habits.”

HMRC data will be distorted in the early months for two reasons, he said.

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He said: “Firstly because many payments are taxed under an emergency tax code which results in an overpayment of tax.

“Pension investors can then subsequently reclaim the overpayment but it will take some weeks or months to sort out.

“Secondly because many pension investors are currently being thwarted by their pension provider’s inability to comply with their payment requests.”

He said there were many variables, which could affect what the total turns out to be.

Mr McPhail said: “We are also seeing some pension investors bringing forward transactions which would not otherwise have taken place for a number of years. Uncrystallised funds payments in particular are proving popular with those in their late 50s.

“Final salary scheme transfers are currently proceeding slowly due to the advisory constraints on this market. In the Autumn statement the Treasury projected a £90 million tax boost thanks to defined benefits transfers. So far the market is only likely to have processed a small percentage of this potential demand.

“Many pension companies have been unable to process their customers’ requests for payouts. As they work through the blockages, we should expect to see activity levels and tax revenues increase.”