Savers reclaimed over £56 million in overtaxation on pension withdrawals in April, May and June this year – the highest three-month figure since records began.
Almost 16,000 reclaim forms were processed during the quarter, with an average reclaim of £3,551 – the second highest figure since the pension freedoms were introduced in 2015.
Approaching £1.1 billion has now been reclaimed by people overtaxed on pension withdrawals in the last eight years.
Tom Selby, head of retirement policy at AJ Bell, comments: “It is simply unacceptable that the government has failed to adapt the tax system to cope with the fact Brits are able to access their pensions flexibly from age 55, instead persisting with an arcane approach which hits people with an unfair tax bill, often running into thousands of pounds, and requires them to fill in one of three forms if they want to get their money back within 30 days.
“While it is arguably positive savers successfully reclaimed a record £56 million in the latest quarter, it is ridiculous they have to go through this process at all. And depressingly, the true overtaxation number will likely be substantially higher.
“In particular, people on lower incomes who are less familiar with the self-assessment process might be less likely to go through the official process of reclaiming the money they are owed. As a result, they will be reliant on HMRC putting their affairs in order.
“One way savers planning to take a single withdrawal in a tax year can potentially avoid the shock of a big overtaxation bill is by taking a notional withdrawal first. This should mean HMRC is able to apply the correct tax code to the second, larger withdrawal.
“Alternatively, you can fill out one of three HMRC forms and you should receive your tax back within 30 days. If you don’t do this, the Revenue says it will put you back in the correct tax position at the end of the tax year.”