HM Revenue & Customs (HMRC) has reported that over £56m ($72m, €64.5m) was paid back to Brits due to over taxation of pensions in the second quarter of 2023.
This is up nearly £8m compared to the first quarter of the year, and comes close to doubling the £33.7m collected in the same period last year.
Around 16,000 reclaim forms were processed during the quarter, with an average reclaim of £3,551 – the second highest figure since the pension freedoms were introduced in 2015
Almost £1.1bn has now been reclaimed by people overtaxed on pension withdrawals in the last eight years.
Jon Greer, head of retirement policy at Quilter, said: “There has been a significant increase in the number of claim forms processed, illustrating just how many people are turning to their pension pots to help them get by as the cost-of-living crisis intensifies.
“However, despite it being a time when people need swift access to their money more than ever, those hoping to use their funds are faced with a system that causes prolonged waiting periods before they can receive the full amount.
“The system is in real need of an overhaul, as the current process is leaving an increasing number of people facing emergency tax at a time they need their money most.”
Tom Selby, head of retirement policy at AJ Bell, added: “It is simply unacceptable that the government has failed to adapt the tax system to cope with the fact Brits are able to access their pensions flexibly from age 55, instead persisting with an arcane approach which hits people with an unfair tax bill, often running into thousands of pounds, and requires them to fill in one of three forms if they want to get their money back within 30 days.
“While it is arguably positive savers successfully reclaimed a record £56m in the latest quarter, it is ridiculous they have to go through this process at all. And depressingly, the true overtaxation number will likely be substantially higher.”
The HMRC data also showed the number of transfers in to qualified recognised overseas pension schemes (Qrops) has fallen to 3,250 in 2022 to 2023. This is a fall from 3,900 in 2021 to 2022.
The total value of these transfers was £680m, up from £517m in the previous year.