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Home Finance Time to simplify system as pensioners reclaim £22m in overpaid tax from HMRC

Time to simplify system as pensioners reclaim £22m in overpaid tax from HMRC

by Uma Rajagopal
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  • Between 1 Jan and 31 March 2022 HMRC paid out £22,317,529 to people who overpaid tax when they accessed their pensions flexibly.
  • When someone accesses their pension flexibly, they are taxed on a “Month 1” basis which means they are treated as receiving that sum every month. This means they can overpay tax.
  • They must fill in one of three forms to reclaim the overpaid tax. During this period HMRC processed 7,412 of these forms.
  • Between 1 April 2021 and 31 March 2022 HMRC has repaid well over £100m in overpaid tax.

HMRC has published the latest pension flexibility statistics Pension schemes newsletter 138 ― April 2022 – GOV.UK (www.gov.uk)

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown:

“Pension Freedoms have been in place for several years now and the issue of overpaid tax has always been a problem, yet we continue to see thousands of people overpaying by hundreds of millions of pounds every year. There must be an easier way for people to be able to access their hard-earned pension cash without being clobbered by tax that they then need to work out how to reclaim. It’s a real fly in the ointment of the Pension Freedoms that have been embraced by society.

The data shows HMRC processed over 7,400 forms in the last quarter alone – over the entire pension freedoms period this must mount up to way over 100,000 applications as people reclaim their own money. It must come as anything from a nasty shock to those who aren’t expecting it, to annoyance and inconvenience for those who do.

Pension freedoms are embedded into the retirement landscape now and it is time the system was reformed to reflect changed behaviours and make it easier for people to access their pensions.”

 

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Uma Rajagopal has been managing the posting of content for multiple platforms since 2021, including Global Banking & Finance Review, Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune. Her role ensures that content is published accurately and efficiently across these diverse publications.