Pensioners making the taxman pay

Thousands of pensioners are paying more tax than necessary when they access their pension savings, and the scale of the problem is hard to ignore.

- by Katie Elliott

THOUSANDS of pensioners are paying more tax than necessary when they access their pension savings, and the scale of the problem is hard to ignore.

Between January and March this year alone, HMRC refunded £44million to people who had been overtaxed on their pension withdrawals. The average refund was £2,881, and since 2015, pensioners have reclaimed more than £1.4billion. The main issue is how HMRC taxes flexible pension withdrawals.

Since the 2015 pension freedoms reforms, people aged 55 and over can take out as much as they like, when they like. But HMRC's systems often apply an emergency tax code to the first withdrawal each tax year, assuming it will be repeated monthly.