My bank recently asked me for my NI Number, I asked them why, they said it’s just for their records ?

Had they asked for your records, I presume you'd have answered Showaddywaddy...

fill in any form now and they ask for information that is pointless for there need to know which was not always the case.

The State Pension is financially unsustainable, because successive governments have used the NIC's to pay day-to-day expenditure instead of investing it & putting it to one side for the population's retirement. As a country we have lived beyond our means for decades & it's now pay-back time by way of increased taxes. The lack of financial education hasn't helped the population who have been blindly led into this dire situation.
The younger generation will rightly feel aggrieved at inheriting this debacle, & not many of them will have defined benefit pensions to help them out. As for defined contribution pensions, members are hoping that their pension contributions are being invested wisely & will look after them in retirement, but hope isn't an investment tool

The same thing happened to me. I cashed in/closed a little pension and they presumed that I would get this payout every year!!

Anyway, if you go online (gov gateway or whatever it's called) you can change it back. Basically the tax office think 'guilty before being proved innocent' - as you say PAYMPE.

Thanks for that I'll see if I can do that online.

Banks forward interest paid on your accounts to the HMRC.

Yes they do that at the end of the tax year so that your tax due can be calculated accurately?
The tax man uses what you had last year as an indicator of what you'll get this year and reduces your tax code to take the tax due on earnings that are not guaranteed. It's totally wrong and immoral to pay tax on money you haven't had and the duty is on thecindividual to put it right.