30 October 2025
If you are covering the latest pension flexibility statistics, please see the following comment from Jon Greer, head of retirement policy at Quilter:
"HMRC’s latest figures show that between July and September 2025, 13,721 pension savers reclaimed a total of £48.56 million in overpaid tax after taking money from their pensions under the flexibility rules.
"Compared to the same quarter last year, the number of reclaim forms submitted rose from 12,331 an increase of over 11%. The average reclaim value also nudged down from £3,592.20 to £3,539.11. While the change in value is modest, the rise in reclaim activity highlights the ongoing scale of the issue and the need for further reform to prevent over taxation in the first place.
“A decade after the introduction of pension freedoms, it remains extraordinary that thousands of people are still being overtaxed every quarter simply for accessing their own savings. The system continues to work against the very flexibility it was designed to promote.
“Although HMRC has made changes to speed up repayments, these figures show the underlying problem persists. The PAYE system was built for regular employment income, not one-off pension withdrawals, and it continues to cause unnecessary complexity for retirees.
“Part of the reason more retirees are feeling the sting of tax on their pension withdrawals is that the State Pension now consumes a growing share of the personal allowance. With the allowance frozen and the State Pension rising each year, many people are being dragged into the tax net. When they make flexible withdrawals to top up their income, a larger portion is now taxable, compounding the frustration when over-deductions occur.
“This quarter’s data also land at a time of significant Budget uncertainty, with speculation about changes to pension tax relief and allowances prompting some people to act hastily rather than wait. Those decisions, often driven by fear of future rule changes, risk damaging well laid future financial plans. It underlines how vital stability and clear communication are if the Government wants to maintain confidence in the pension system.”
