Over £38m has been reclaimed by savers who were overtaxed on their pension freedoms withdrawals in the third quarter of 2018, marking the highest figure on record, according to HMRC's most recent Pension Schemes Newsletter.

The publication revealed that some 18,353 official reclaim forms had been processed by HMRC between 1 July and 30 September this year, with an average repayment amount of more than £2,000 per person.

Including the figure from Q3, the total amount reclaimed by savers has now reached an astonishing £372.5m since the pension freedoms launched in April 2015.

Commenting, AJ Bell senior analyst Tom Selby said: “A staggering £372million has now been reclaimed by savers overtaxed on their withdrawals since the pension freedoms launched. While it is good news HMRC is processing record numbers of claims, it also demonstrates that this problem is not going away.”

However, Selby highlighted that “in reality” the vast majority of people that are overtaxed are not completing the official reclaims forms, meaning the amount of emergency tax paid by savers will be “much higher” than this official figure.

“For those who access their pension for specific purposes such as paying down debt or funding care for an elderly relative, receiving potentially thousands of pounds less than they expected could present a very real financial challenge,” he added.

“We do not pretend this is an easy problem with easy solutions, but the Government cannot simply ignore the issue either. Policymakers need to seriously consider whether the current approach is the right one and engage with the industry to consider alternatives that don’t unfairly punish savers who access their retirement fund.”

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