HM Revenue & Customs has repaid £54.9m in pension tax during the third quarter of this year to 17,300 people.
According to data released by the tax authority this was a 15 per cent increase on the overpayments reported for the second quarter of 2019 when the taxman repaid £46.8m to 17,200 individuals.
Overall, HMRC has given back some £536m to more than 220,000 taxpayers since the introduction of the pension freedoms in April 2015.
£30bn has been withdrawn from schemes since the pension freedoms were introduced in April 2015.
Pension freedom rules mean those aged over 55 no longer have to purchase an annuity to access their pension income but can instead enter drawdown, take a cash amount or buy an annuity.
But any withdrawals above the 25 per cent tax-free amount are taxable at an individual’s marginal rate of income tax.
Tax discrepancies happen when a pension provider does not have the correct tax code for the individual and withdrawals are taxed using a higher rate emergency tax code, to be reclaimed later.
Sir Steve Webb, director of policy at Royal London, said: “Even by their own low standards, HMRC have outdone themselves in the last three months, taking more than £54m of savers’ money in income tax to which they were not entitled.
“It cannot be right that tens of thousands of people each year have too much tax taken out of their pension and then have the hassle of filling in a form to get back money that is rightfully theirs.
“Whoever ends up running the country after the general election needs to tell HMRC to stop this practice as a matter of urgency.”
An HMRC spokesperson said: “Nobody will overpay tax as a result of taking advantage of pension flexibility.
“Individuals can claim back any overpayment due to an emergency tax code being applied immediately and we will repay this in 30 days.
“Anyone who does not claim will be automatically repaid at the end of the year.”
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