State pensioners overcharged £3,160 by HMRC with thousands impacted
Thousands of state pensioners have been overcharged £3,160 by HMRC. 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.
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“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.”
Mr Cole went on, adding: “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.”
Mr Cole warned: “These figures show the system is still fixing errors rather than preventing them.”
The personal finance expert continued: “When flexible pension withdrawals are then layered on top, emergency tax becomes more likely and more costly.”