A record £54 million was repaid to savers who were overtaxed on pension freedoms withdrawals in the three months to September 2019, according to a new study.
- In total £535 million has now been repaid to investors who have filled out the official reclaim forms since April 2015
- The average reclaim per investor breached £3,000 for the first time in the latest quarter
- Savers who are overtaxed risk being pushed into serious financial difficulty
Tom Selby, senior analyst at AJ Bell, comments:
“HMRC processed a record £54 million of reclaims for overpaid pension tax in the latest quarter, pushing the total paid back to people who filled out the official forms well past £500 million. Given most people don’t fill out these forms, this is almost certainly the tip of a sizeable iceberg.
“It is time for the Government to accept that, while the retirement flexibilities introduced in April 2015 have been well received by savers, the tax system that sits alongside them is simply not fit for purpose.
“People risk being left short of money as a result of HMRC’s approach and forced to either take out more cash from their pension, potentially paying extra tax in the process, or seeking the funds from elsewhere.
“This is a particular problem if someone has earmarked the withdrawal for something specific, such as helping their child buy a house or paying for long-term care for an elderly relative. Savers struggling to make ends meet as a result of being overtaxed could even be forced into the arms of a high cost lender.
“At the absolute bare minimum the Government needs to urgently review its approach to the taxation of pension freedoms withdrawals, which has never been consulted on formally.
“Its failure to do this so far represents a serious failure of policymaking which will inevitably have caused people distress and potentially significant financial hardship.”