Savers are being hammered with massive tax bills, with some losing almost £100,000 at once, for withdrawing their pensions too quickly.

Incredibly, nearly 300 pensioners were each hit with tax charges of at least £98,700 after taking their full retirement pots of £250,000 or more in a single swoop, figures from Standard Life reveal.

Another 1,600 cashed in pots between £100,000 and £249,000, triggering tax bills of at least £27,400 each.

Experts warn the bills are entirely avoidable – and say savers are being punished for failing to navigate the pension tax trap.

And with rumours swirling of another tax raid by Chancellor Rachel Reeves in the next Budget, financial experts are urging millions approaching retirement to act now before it’s too late.

“You don’t necessarily need to take all your tax-free lump sum in one go,” said Mike Ambery of Standard Life.

“You can usually take it in chunks over months or years. This can sometimes give you an income each month without paying any tax at all.”

Take care – or pay twice as much tax

Calculations by wealth firm AJ Bell show that the way savers access their pensions could more than double the amount of tax paid on income.

In one example, a pensioner who wants to take out £25,000 a year from their pot could pay either £1,236 in tax – or nearly £2,500 – depending on how they structure withdrawals.

The key is something known as “crystallisation” – a clunky bit of jargon, but one that could save you thousands.

Rather than taking the whole 25% tax-free lump sum at once, pensioners can instead crystallise their pension in chunks. This allows them to continue benefiting from tax-free allowances each time they draw income.

What is crystallisation – and why does it matter?

When you crystallise part of your pension, you unlock 25% of that portion as tax-free cash. The rest – 75% – goes into drawdown or is taken as income, which is taxed.

By spreading withdrawals over the years, you can keep tapping the 25% tax-free benefit again and again, rather than using it up all at once.

Tom Selby of AJ Bell told the Times: “Deferring your tax-free cash can reap dividends, because the longer you leave your pot invested, the more opportunity it will have to grow.”

Take a pension pot worth £100,000. Cash it in now, and you’ll get a tax-free £25,000. But if you leave it invested and crystallise it gradually – and the pot grows at 5% annually – your 25% tax-free share could rise to £30,525 after five years.

The Isa trick that could save thousands

Helen Morrissey, of investment platform Hargreaves Lansdown, says savers should look beyond pensions to manage tax bills in retirement.

“Income can be taken from your Isa tax-free, so you may choose to get your retirement income from a mix of your pension and Isa to keep that tax bill down.”

In one example, drawing £16,750 from your pension (crystallised) and £8,250 from your Isa means the entire £25,000 could be tax-free – thanks to combining the pension’s tax-free allowance and the personal income allowance.

Gifting loopholes to avoid 40% tax

There are several exemptions that allow people to pass on wealth tax-free:

£3,000 can be given away each tax year – and if unused, you can carry forward the previous year’s allowance for a £6,000 gift.

You can also give £250 to any number of people tax-free, as long as no other exemption is used for them.

Wedding gifts: £5,000 from parents, £2,500 from grandparents, and £1,000 from others are tax-free.

Unlimited gifts to charities or political parties are exempt.

Regular gifts from surplus income are also allowed – as long as they don’t impact your standard of living.

Drysdale added: “It’s a good idea to keep clear records of your income and expenditure when using gifting exemptions to demonstrate that the necessary conditions have been met.”