The Treasury has revised down its expected intake from the cut to the money purchase annual allowance (MPAA) as it has said less people will be affected than previously thought.
Chancellor Philip Hammond announced plans to cut the MPAA in last year's Autumn Statement. At the time the Treasury published a consultation on the proposal.
Under the plans, which were confirmed in the Budget earlier this month, the amount people can put back into a defined contribution (DC) pension once they have started taking benefits from a pension will fall from £10,000 to £4,000.
The Treasury released its response to the consultation today. It said respondents questioned the evidence behind the benefits of the change, with the industry commenting that fewer people than expected would be affected.
The Treasury accepted these comments and said: ‘The government agrees that the number actually impacted is likely to be smaller.’
This admission was reflected in updates to its numbers around the policy.
When it was announced initially last year, the Treasury expected the tax intake from the cut to be £70 million for 2017/18, rising to £75 million in 2020/21 and 2021/22.
Although not reported at the time, in the documents released alongside the Spring Budget earlier this month, the government revised down these figures, and said the intake will be £65 million in 2017/18, and then will stay at £70 million until 2021/22.
This means the benefit to the Treasury will be £15 million less than first expected over the next five years.
In the consultation, the Treasury said respondents did not indicate the cut will impact on auto-enrolment.
It also said while 'many' respondents said £4,000 was too high, some also said this level was 'reasonable or even too high'.
'A £4,000 MPAA does not prevent higher-rate taxpayers from recycling, but does reduce the incentive for doing so and is unlikely to affect many basic-rate taxpayers. The MPAA will reduce from £10,000 to £4,000,' the document said.