HMRC repaid a total of £56.2m to people who overpaid tax when they flexibly accessed their pensions in Q2 2023, up from £33.6m in Q2 2022, the latest government Pension Schemes Newsletter has revealed.

The update confirmed that HMRC repaid a total of £56,243,842 from 1 April to 30 June 2023, marking a nearly two-thirds increase on the £33,689,819 repaid in the same period in 2022.

The tax repayments on flexible withdrawals are necessary as HMRC applies an emergency 'month 1' tax code on the first withdrawal, which can lead to an initial over-taxation.

People reclaiming overpaid tax must fill in one of three forms, with the latest government Pension Schemes Newsletter revealing that HMRC processed a total of 15,839 during the period, including 11,232 P55 forms, 2,987 P53Z forms, and 1,620 P50Z forms.

Commenting on the latest figures, AJ Bell head of retirement policy, Tom Selby, argued that "it is simply unacceptable that the government has failed to adapt the tax system to cope with the fact Brits are able to access their pensions flexibly from age 55".

“While it is arguably positive savers successfully reclaimed a record £56m in the latest quarter, it is ridiculous they have to go through this process at all. And depressingly, the true over-taxation number will likely be substantially higher," he continued.

“In particular, people on lower incomes who are less familiar with the self-assessment process might be less likely to go through the official process of reclaiming the money they are owed. As a result, they will be reliant on HMRC putting their affairs in order."

Industry experts also previously stressed the need for the process to be simplified to avoid over-taxing pension savers, after a previous update in Q1 2023 revealed that total repayments since the introduction of pension freedoms in 2015 had passed £1bn.

In addition to the latest pension flexibility statistics, the newsletter included an update on qualifying recognised overseas pension schemes transfer statistics.

This showed that the number of transfers in to qualified recognised overseas pension schemes has fallen to 3,250 in 2022-23, down from 3,900 in 2021-22.

However, the total value of these transfers increased, rising from £517m in 2021-22 to £680m in 2022-23.

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