You are here: Home - Retirement - Retirement planning - News -

Pension savers pay £400m in excess tax

Written by:
New figures issued today by HMRC show pension savers have over-paid more than £400 million since the start of pensions freedoms in April 2015. 

When individuals make lump sum withdrawals from their pension fund after the age of 55, it is routinely taxed on the basis of an emergency tax code, which assumes that the payment will be regular rather than a one-off.

This can result in significant overpayments, which then have to be recovered by individual taxpayers by filling in one of three different claim forms depending on their circumstances.

HMRC’s own data shows that it has had to repay tax on 174,000 occasions to the tune of £402m. In the last three months of 2018, over £30m was repaid to over 13,000 people. The average reclaim Average reclaim since April 2015 sits at £2,312.

Helen Morrissey, pensions specialist at Royal London said: “HMRC is utterly shameless in the way it over-taxes people and then expects them to claim a refund. The system should be run for the convenience of taxpayers, not the convenience of HMRC. It is time that this over-taxing spree was brought to an end’.

Tom Selby, senior analyst at AJ Bell, pointed out that the figures don’t include those who fail to fill out one of the three official reclaim forms (P55, P53Z or P50Z). He added: “HMRC’s insistence on applying emergency tax to hard-working savers’ first pension freedoms withdrawals continues to harm those who access their own money flexibly.

“What these figures don’t capture is those who don’t fill out the forms. Given 150,000* pensions per quarter have been accessed for the first time, it appears far more people either don’t know they have been penalised or are unsure how to go about getting the money back.

“This is hardly surprising given many savers who use the pension freedoms will have never filled out a tax return before.

“This has been going on for almost four years now and the Revenue still steadfastly refuses to properly review its approach. We urge policymakers to think again and work with the industry to find a better solution.”


There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Revealed: the most popular ISA funds

The UK’s second largest investment platform, Interactive Investor, has revealed the most popular funds among i...
Revealed: the most popular ISA funds

Get £10 off fuel this weekend

If you’re planning a bank holiday getaway this weekend, you could save some money on fuel by signing up to Top...
Get £10 off fuel this weekend

PPI complaints drop as deadline looms

FCA data showed a 5% drop in complaints against financial services firms in the second half of 2018, largely a...
PPI complaints drop as deadline looms

Ryanair jetting towards US flights for £10

Ryanair is on course to achieve its long-held ambition of offering transatlantic flights to the US – and the...

Investing in car parks: a good vehicle for income seekers?

As the search for income continues, many investors are turning to alternatives, with car parks becoming increa...

A quick guide to guarantor loans – in association with Guarantor Loan Comparison

Considering a guarantor loan or becoming a guarantor yourself? Read our essential guide...

Results round-up: Companies to watch this week

Mulberry and more will face the music this week.

Product launches of the week

Select Property Group, Schroders, Leeds Building Society and more have exciting news this week.

Money Tips of the Week

Read previous post:
Most wanted: A garden annexe is the latest way to create extra living space

They can increase your living space, and the value of your property. What's not to like about garden annexes?