Pension Tax Refunds
Why can I claim a refund once I have drawn my pension?
When you reach the age of 55 and have been paying into a personal or private pension, you have the option to draw a lump sum from your pension pot. 25% of this will be tax-free, and you will have to pay income tax on 75% of the amount drawn. Now here is the thing, when you draw this money your pension provider will be paying this through the PAYE system. So, if you take a lump sum of £20,000, you'll pay tax as though you were earned a staggering £240,000 so it is highly likely that you have been overtaxed.