Retirees who have been over-taxed after using the pension freedoms to withdraw funds from their pensions have been urged to take the initiative and reclaim the tax back from HMRC.
New data has revealed HMRC repaid £37m to individuals overtaxed on pension freedom withdrawals in the three months to the end of September after processing 16,168 tax reclaim forms.
This means that in total around £262m has now been repaid to savers charged emergency tax since the freedoms were introduced in April 2015. However, according to Tom Selby, senior analyst at AJ Bell, this could be the "tip of the iceberg".
"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," he adds. "As a result they could end up getting thousands of pounds less than they thought they would when they made the withdrawals."
The forms in question - P55, P53Z and P50Z - can be found on the official Government website
Calling the system "clumsy", Tom McPhail, head of policy at Hargreaves Lansdown, said the average tax reclaim in the past quarter was just under £2,300, with around 8% of those who took a flexible payment from their pension making a reclaim.
"In theory HMRC processes mean even if you don't fill in the form and immediately reclaim overpaid tax, you should eventually get the money back," he adds. "The problem is HMRC isn't infallible: if you don't take the initiative and ask for the money back, you risk missing out; at best you'll miss out on the use of the money for up to a year."
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