Jessica List, pension technical manager at Curtis Banks, said: “It seems astounding that HMRC is processing 4,000 claims every month – and this only represents individuals who are reclaiming their money during the tax year, rather than waiting until the end.
“This isn’t a new problem, but each time figures like these are released it’s a reminder of how many people have this negative experience when accessing their pensions.”
Under the pension freedom rules people aged 55+ no longer have to purchase an annuity to access their pension income but can instead enter drawdown or take a cash amount.
However, any withdrawals above the 25 per cent tax free amount are taxable at an individual's marginal rate of income tax.
In some cases, the pension provider will already have a proper tax code for the beneficiary, if the saver has previously withdrawn money from their pension during the tax year.
But where the provider does not have the correct tax code for the individual – which is in the majority of cases - withdrawals are taxed using a higher rate emergency tax code, which routinely results in an excessive tax deduction that has to be reclaimed later.
Those that have been overtaxed can fill in one of three different forms - the P55, P53Z and P50Z - which allow people to claim back money from HMRC mid-way through the tax-year.
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