HMRC pays back £627million in overpaid pension tax – are you due a refund?
PENSION savers could be due a windfall after new HMRC figures reveal some have wrongly been taxed after taking cash out of their pots.
The latest data published by HMRC revealed a total of £627million is owed to savers - an average of £3,500 per person between April and July.
Since new pensions rules were introduced in 2015, hundreds of thousands of people have been overcharged in tax.
The new rules aimed to give savers more control over their retirement income and allow pensioners over the age of 55 to withdraw money from their pots whenever they like.
The first 25% of pension fund lump sum withdrawals are tax-free, while the remaining 75% is added to taxable income income for the year.
But where savers are still working, HMRC has wrongly applied an emergency tax on the first 25% of withdrawals thinking they're additional earnings.
The taxman has so far paid back £27million in overpaid tax during lockdown, according to consumer website Which? But that means £600million is still left to be repaid.
Since the scheme was brought in, more than £37billion has been taken out of pension savings.
How to claim back your cash
You can claim back overpaid tax in one of three ways on the .
This could be through a P55 form, which should be used if you haven’t withdrawn your entire pension, and aren’t taking regular payments either.
The P53Z form should be used if you have withdrawn your entire pension and receive other taxable income.
If you have withdrawn your entire pension, but have no other taxable income you should fill out the P50Z.
The Sun has asked HMRC for clarification on what happens if you don't withdraw your full pension but do take regular payments.
These forms are available to be filled in online, but you can also print them off and post them to HMRC.
Once a claim has been filled out, HMRC says you should receive a refund of the overpaid tax within 30 days.
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In other pensions news, earlier this year, pensioners were dealt a blow by the government, which cut extra payments for “adult dependents” by up to £70 a week (or £3,500 a year).
Martin Lewis also warned that a million retirees could be missing out on £3,000 a year in pension credits.
The Sun also published a handy guide to make sure you avoid a pensions crisis, with top tips to make sure you have saved enough for retirement.