Pension savers forced to pay taxman money they don't even owe in what has been described as a 'scandal'
Almost £1bn in unnecessary tax on pension withdrawals has been paid by Brits. The figure has come about because of HMRC rules that treat one-off withdrawals like they will be repeated.
The Express reports that the average overpayment is now £3,141 and pension savers face a complex process to get hold of their own money again. The overpayment total is going up nationally by £15m a month.HMRC data shows savers have reclaimed £970m in overtaxation since 2015’s pension freedoms allowed the over-55s to make flexible cash withdrawals from their retirement pots. Tax repayments hit a record £45m between October and December, with 14,355 claiming.
Tom Selby, head of retirement policy at AJ Bell, says many people affected by this will be on lower income incomes who are less familiar with the self-assessment tax return process. These same people cannot afford to wait for money that is rightfully theirs. However, Selby had a warning for people thinking of taking an early pension drawdown. He said pensioners who draw unsustainable amounts from their savings in the early years of retirement “risk running out of money later".
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