Quarterly figures published this morning by HMRC in their Pension Schemes Newsletter reveal a shocking increase in the number of people being over-taxed when they take money from their pension.
Since ‘pension freedoms’ were introduced in 2015, more people have been able to take lump sums out of their pension fund as and when they wish. But these lump sums are often over-taxed on an ‘emergency’ basis, with taxpayers having to fill in one of three different forms to claim back the excess tax. New figures for the period April-June 2019 show that the number of people over-taxed reached record levels. More than 17,000 people reclaimed £46m in tax in the last quarter, compared with 14,000 people claiming back £29m a year earlier. The total amount which taxpayers have had to claim back is now around £480m and is expected to pass the half a billion pound mark in the next quarter.
Commenting, Steve Webb said:
‘It remains a scandal that people who are legitimately accessing their own money, using freedoms given to them by the government, are routinely being over-taxed for the convenience of HMRC. Thousands of people every month are having to fill in complex paperwork to recover tax they should never have had to pay. The latest figures show that this problem is now reaching epidemic proportions, with nearly half a billion pounds having to be prised out of HMRC’s hands and returned to its rightful owner. The new Chancellor needs to address this issue as a matter of urgency’.
Notes to Editors
1. The latest quarterly figures can be found at https://www.gov.uk/government/publications/pension-schemes-newsletter-112-july-2019/pension-schemes-newsletter-112-july-2019
2. The following table shows all the quarterly data since the series began. The first three columns are for the three different forms which can be used to claim back overpaid tax and show the number of such forms returned each quarter. The remaining columns show the amount repaid and the total number of forms.
About Royal London:
Royal London is the largest mutual life insurance, pensions and investment company in the UK, with assets under management of £139 billion, 8.6 million policies in force and 4,348 employees. Figures quoted are as at 30 June 2020.