HM Revenue and Customs (HMRC) has repaid a record amount of £198m in the latest tax year to those who have overpaid tax on flexible pension withdrawals.

The Government’s tax collection department stated that in total, over £1.2bn has been repaid by HMRC on flexible pension withdrawals since the refund process started almost a decade ago.

New figures also revealed that in the first three months of the year, £42m was reimbursed in overpaid tax.

Of the forms processed, 8,378 were P55s, 3,865 were P53Zs and 1,018 were P50Zs.

Pension, tax and estate planning specialist at Canada Life, John Chew, said: "Although the overpaid tax on pension withdrawals can be reclaimed using one of the various forms available, the data shows record amounts of tax continues to be overpaid. There must be a better way of managing these withdrawals, especially if people are targeting a specific reason to use the money and find themselves short due to emergency tax being applied.

"While we wait for the tax system to catch up with the freedoms, a good tip for people who are making a pension withdrawal for the first time is to request a small withdrawal of say £100. That will generate a tax code from HMRC which the pension provider will apply to any subsequent withdrawals. That will result in the tax being taken at source being far more accurate in many more cases, not only reducing the burden of paperwork but equally importantly the customer receiving a more accurate withdrawal in the first place."

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