Thousands of pensioners are being overtaxed by HMRC when accessing their retirement savings, with average repayments now topping £3,000. New figures show that almost 14,000 people reclaimed tax between January and March 2026 after taking flexible pension withdrawals, with £44.1 million repaid over the three-month period.
Despite a 9% drop in the number of claims compared with a year earlier, the total amount refunded has barely changed – pushing the average repayment up to just over £3,160. Adam Cole, retirement specialist at Quilter, said the data highlights a shift in the scale of errors rather than the number of people affected.
He explained: “HMRC’s latest figures show that between January and March 2026 almost 14,000 people had to reclaim tax after accessing their pension flexibly, with more than £44.1m repaid in just three months.”
“While the number of reclaim forms is down by around 9% compared with the same period last year, the total amount repaid has barely changed, which is a telling detail.”
He added that the rising average refund points to a growing problem for those caught out by the system.
Mr Cole observed: “The real shift is not the number of people affected, but the size of the mistakes being made. The average repayment has risen to just over £3,160, up almost 10% year on year. That suggests fewer people may be caught by emergency tax, but when it happens the sums involved are larger.”
The issue stems from how pension withdrawals are taxed. Under the PAYE system, one-off withdrawals are often treated as if they will be repeated every month, resulting in “emergency tax” being applied.
Mr Cole said: “PAYE was designed for predictable monthly earnings, not ad hoc pension withdrawals, and as a result it continues to generate avoidable overpayments that have to be corrected after the fact.”
Although HMRC has improved repayment speeds, the specialist warned the system still leaves retirees temporarily out of pocket.
Mr Cole warned: “These figures show the system is still fixing errors rather than preventing them.”
The problem is being compounded by a broader increase in tax pressure on pensioners. The personal allowance remains frozen until April 2031, while the state pension is rising, pushing more retirees into paying income tax.
Mr Cole argued: “When flexible pension withdrawals are then layered on top, emergency tax becomes more likely and more costly.”
He urged savers to plan carefully before accessing their pensions to avoid unnecessary tax charges and delays in reclaiming overpayments.
Alongside the tax data, HMRC has also provided further detail on upcoming changes to the minimum pension access age. The normal minimum pension age is set to rise from 55 to 57 in April 2028, with updated guidance clarifying how the rules will apply in practice.
Mr Cole suggested: “In broad terms, the draft regulations are functional rather than radical, providing reassurance that access at 55 will continue to be treated as an authorised event for those who already qualify.”
However, he warned that one group could face an unexpected delay.
Mr Cole stressed: “The group that needs to pay closest attention are those born between 6 April 1971 and 5 April 1973. Under the old rules, they would have expected to access their pension at 55, but if they have not taken benefits before April 2028, they may need to wait up to two additional years.”
For those planning to use pension savings to bridge the gap into retirement, the change could have significant implications.
Mr Cole concluded: “That makes timing and forward planning far more important.”
With thousands still being overtaxed each year, experts say checking pension withdrawals and reclaiming any overpaid tax remains essential.
