Keep HMRC's hands off your pension pots

PENSION savers are still being hit with punishing emergency tax bills when they dip into their pension pots, with some forced to reclaim more than £100,000 from HMRC.

- By Harvey Jones

Around 60,000 people were forced to claim back money in 2023/24 after being overtaxed on their first pension withdrawal, new figures obtained by pension specialists Royal London reveal.

While the average HMRC refund was a modest £3,342, a handful of retirees had to claw back life-changing sums, with the top 25 refunds averaging £106,897 each.

This has been a problem since 2015's pension freedom reforms allowed savers to make cash withdrawals from age 55. While 25% of withdrawals are usually tax-free, the remainder is taxed as income.

When someone starts taking money from their pension, the taxman assumes that amount will be repeated every month for the rest of the tax year.