A new system of collecting data proposed by HMRC could mean pensioners never have to pay emergency tax rates again, according to Standard Life head of pensions policy John Lawson.
In a consultation closing toady, HMRC proposes a system of recording income monthly in order to calculate tax in real time as standard.
Currently, details of income are reported to HMRC once a year, creating difficulties leading to over and underpaid tax.
"Standard Life is very supportive of the proposed system," says John Lawson.
"We use PAYE to pay annuities, and to do that we have to use emergency tax codes, which are based on one month's income. This means pensioners are very often overtaxed.
"Many pensioners find themselves overtaxed, if they realize it at all, and do not know they can fill out forms to get a rebate. The forms are also complicated, and some people do not understand them well enough to complete them. So, this system could prevent overtaxation, and the situation HMRC currently finds itself in from happening again."
Due to mass over and underpayment of tax, HMRC is currently facing the possibility of having to write off £1.5bn of unpaid tax because some cases are over two years old.
Ten million people in the UK are currently due for rebates after overpaying their tax, creating a huge backlog of administration for the Revenue.
What made financial headlines over the weekend?
The chairman doggedly tries to be amusing
'Profitability is almost a myth'
Active Wealth in liquidation
Cautious welcome for volatility