HM Revenue & Customs has revealed it gave back £32.2m ($41.9m, €38m) in overpaid tax to pensioners between 1 October 2019 and 31 December 2019.
The taxman received a total of 10,335 repayment claims from retirees during the period, averaging to £3,000 per pensioner.
The claims can be done through three different forms, namely P55, P53Z and P50Z.
For the last quarter of 2019, HMRC received:
- 5,759 P55 forms;
- 3,422 P53Z forms; and,
- 1,154 P50Z forms.
Lack of harmony
According to Jon Greer, head of retirement policy at Quilter, the huge number of refunds is caused by the incompatibility of the UK’s pay-as-you-earn (PAYE) tax system and pension freedoms.
“Pension savers have been forced to claim back over £3,000 per person, and a record £32.2m for the final quarter of 2019,” he said.
“The problem has nothing to do with anything pensioners have done wrong and lies solely with the PAYE system.
“HMRC’s PAYE system is not built for one-off withdrawals from a pension, and so does not fit with the new world of pension freedoms.
“People who make such withdrawals from their pensions, as is their right, may overpay tax and then wait 12 months or more to get the money back when HMRC automatically reviews tax liability.”
The three forms “were created so people could claim back mid tax-year and not have to wait to receive money that is rightfully theirs”, Greer continued.
“The onus is very much on the government to ensure it is doing all it can to give pensioners their hard-earned money back.
“An over £3,000 hit on your pension can be substantially detrimental to your lifestyle in retirement,” Greer added.
