“The requirement to tax on a Month 1 Emergency Code basis when the pension freedoms are first used has led to hundreds of thousands of people being taxed more than they had been expecting.”
Mr James notes: “The government did put in place mechanisms to allow the excess tax to be reclaimed, but this takes time.”
He cautions: “If people are taking out sums on the basis of an immediate need, after tax, of a certain amount then they’re having to withdraw a larger gross amount to achieve this.
“Forcing people to take more out of their pensions than they want, just because the system forces individuals to be over-taxed at outset, cannot be a good outcome, so we’d like HMRC to look at alternative options.
“These wouldn’t be new – greater flexibility over taxation has been available for two decades under the older, capped drawdown arrangements.”
eleanor.duncan@ft.com
