HM Revenue and Customs (HMRC) paid out £37m in overpaid tax to pension freedoms users in the third quarter of the year, its quarterly figures have revealed.
HMRC processed 16,168 tax repayment claim forms across three types of document between 1 July and 30 September: 8,489 were P55s, 5,944 were P53Zs and 1,735 were P50Zs.
The figures came after HMRC revealed £1.6bn was withdrawn in the same quarter using the pension freedoms, and the Work and Pensions Committee started oral evidence sessions as part of its inquiry into the policy.
Hargreaves Lansdown head of policy Tom McPhail said the figures raise questions about how easy it is for individuals to claim compensation when they are overcharged.
"The average tax reclaim in the past quarter is just under £2,300, with around 8% of those who took a flexible payment from their pension making a reclaim," he said.
"In theory HMRC processes mean even if you don't fill in the form and immediately reclaim overpaid tax, you should eventually get the money back. The problem is HMRC isn't infallible: if you don't take the initiative and ask for the money back, you risk missing out; at best you'll miss out on the use of the money for up to a year."
The system is clumsy and not designed in the best interests of the investor, he added.
"HMRC and pension providers should be able to request the appropriate tax code in advance of making any payment, the technology is there to do this kind of thing," McPhail continued.
AJ Bell senior analyst Tom Selby added the problem may be far larger than HMRC figures suggest.
"While hundreds of millions of pounds has been successfully reclaimed by individuals overtaxed on pension freedoms withdrawals, this could be the tip of the iceberg.
"Many of those affected - particularly basic rate taxpayers and people who don't take advice - will have little or no experience dealing with tax matters and might not even know the reclaim forms exist."
Figures for the period 1 October to 31 December 2017 will be published in January 2018.
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