The government has said pensions flexibilities have raised £1.7bn more than expected so far as individuals are withdrawing more cash than previously thought.
In its Budget policy costings document, HM Treasury said the flexibilities, which came into force in April 2015, were originally estimated to raise around £300m for the government in the 2015-16 tax year and £600m in 2016-17.
However, it said the measure has raised far more than anticipated - raising £1.5bn in the 2015-16 tax year and expected to raise £1.1bn in the current 2016-17 tax year.
As a result, the Treasury has brought forward its assumptions for how much pension freedoms will raise.
HM Treasury explained: "The original costing assumed individuals would spread their withdrawals over four years, but the latest HMRC information points to larger average withdrawals than we expected so we have shortened this assumption to three years.
"This brings forward the peak year of yield from 2018-19 to 2017-18. HMRC data also suggest that the average tax rate on withdrawals might be higher than originally expected. Some individuals are taking larger amounts than they would have been able to purchase through an annuity, thereby creating a higher tax liability. We now expect the measure to bring in £1.6bn in 2017-18 and around £0.9bn a year for the remainder of the forecast."
Commenting on the document, Hymans Robertson partner Chris Noon said: "There are several reasons why the government has collected more tax from freedom and choice than it originally estimated.
"First, average withdrawals have been larger than anticipated. The Government assumed individuals would spread withdrawals over 4 years, which they haven't. This shows that individuals have been making suboptimal choices due to a lack of understanding of the tax consequences of their decisions. They've been stung with hefty tax bills as a result.
"Second, many people with defined benefit (DB) pensions will have converted some or all of this benefit to a Defined Contribution (DC) fund. They will then typically draw this money much faster than the DB benefit would have been paid.
"Some of the increase in tax revenue to the government will come at the expense of individuals' pensions pots. This underscores the need for better support around the decisions people now have to make.
"The message could not be clearer: we need to be better at helping consumers exercise their freedoms in an informed way. There is a real danger that the many people who have withdrawn funds without help from an adviser will discover that they have been taking out too much, being hit by huge tax bills which then depletes their remaining pension pot."
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