Pensioners with annuities face continued injustice

For years pensioners with certain types of pensions (annuities) have had too much tax deducted from their payments.

Often those pensioners have not known that they have been overcharged, or how to recover the overpaid tax.

Robin Williamson, Technical Director of the Low Incomes Tax Reform Group, says: “Now, to add to their pain, HMRC are refusing to repay overpaid tax that is more than six years old, despite the Department’s own delay in telling the pensioners that they have been overcharged.”

Retirement annuities are pension plans which were generally phased out in the late 1980s but a million or so people are still getting income from them. As from next April the annuities paid under these plans will come within PAYE, rather than having tax automatically deducted at 22%.

Robin Williamson explains: “In 2004, a Treasury Minister promised that HMRC would take action to explain to these pensioners that they had been overtaxed, and how to recover the excess. Despite this, HMRC are only now – two years later – sending out the letters.”

The Low Incomes Tax Reform Group (LITRG) have asked that the normal time limit for repayment of overpaid tax – six years – be extended to eight years in recognition of the two-year delay. But HMRC are taking a legalistic approach and saying that the maximum number of years that they are prepared to repay in these cases is six years. This is despite the fact that it took HMRC two years from when the government minister promised maximum help, to write and warn people.

Robin Williamson adds: “When a taxpayer is negligent and underpays taxes then HMRC can go back and collect underpaid taxes for 20 years. When some of the poorest pensioners in the land want a repayment of the taxes that they have overpaid, HMRC offer 6 years.”