The government’s approach to the taxation of pension withdrawals is a “quiet scandal”, according to AJ Bell.
The firm analysed HM Revenue & Customs (HMRC) data, finding savers have been overtaxed around £892m since 2015. It said more than £33m was repaid to over 10,000 people overtaxed on pension withdrawals in April, May and June, with the government's monthly newsletter for July 2022 revealing the average reclaim sat at £3,363. Over-taxation occurs when savers flexibly access income from their retirement pot for the first time and are taxed on a ‘month one' basis, meaning usual tax allowances are divided by 12 and applied to the withdrawal. AJ Bell said this approach "risks exacerbating...
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