HMRC repaid £48.7m from 12,767 claim forms that were processed through the quarter for tax overpayments on pension flexibility payments.
Improvements to the system are being applied from the current tax year, which should mean that people accessing their pension cash are moved onto the correct tax code sooner, minimising or eliminating the need to claw back overpayments.
Jon Greer, head of retirement policy at Quilter pointed out that the current figure brings the total to around £92m for the year to date. and that for the second quarter, this equates to just under £4,000 per refund, “so HMRC’s changes might have resulted in marginally fewer claims but with a higher value compared to the previous quarter, although this was also slightly down on the same period the year before,” he says.
Greer added: “The idea behind HMRC’s new tax coding process is that it should reduce the administrative burden on savers, while also minimising the number of overpayments being made in the first place. But the changes they made do not impact the taxation of the first pension payment and although it is early days, and the stats may include payments from the previous tax year, the change appears to be having minimal impact. Pension withdrawals are always going to be a challenge for a PAYE system that is designed for regular income. Many people now access their pension for a variety of reasons, be that regular income, gifting, emergencies or one-off payments and each of these could result in emergency tax codes being issued. This is a headache for people as the burden is on them to apply for a tax refund.
“This new system will need some time to bed in and hopefully we do start to see the number of claims drop more significantly.”
