Latest HMRC statistics show that £37m was repaid to individuals overtaxed on pension freedoms withdrawals just between 1 July and 30 September 2017, indicating that the issue has not yet been resolved.
Tom Selby, senior analyst at AJ Bell, admits he was “staggered” by the £262m ($348m, €299m) figure.
He estimates the true sum could be much higher, as the figures only cover those who have filled out complex official forms to reclaim the tax (P55, P53Z and P50Z).
Tip of the iceberg
“While hundreds of millions of pounds has been successfully reclaimed by individuals overtaxed on pension freedoms withdrawals, this could be the tip of the iceberg,” he said.
“Many of those affected – particularly basic rate taxpayers and people who don’t take advice – will have little or no experience dealing with tax matters and might not even know the reclaim forms exist.
“As a result they could end up getting thousands of pounds less than they thought they would when they made the withdrawals. While HMRC says eventually people’s tax position will be rectified even if they don’t fill out the relevant form, this will be no use to someone who needs the money today to pay social care costs or help fund their kids’ tuition fees.”
Selby concluded that the government needs to urgently review a policy which lumbers savers using the freedoms as designed.
