Pension savers have been handed a “staggering” £262m in refunds from the taxman after being overcharged. Official figures show £37m of refunds from the pensions “super tax” were made in just three months between July and September.

Telegraph Money first revealed in April this year that hundreds of thousands of savers were paying too much tax when using the “pension freedoms”. The problem is caused by HM Revenue & Customs systems that tax one-off withdrawals as if they were the first of 12 regular payments.

A £10,000 one-off withdrawal is therefore taxed as if annual income will be £120,000. As a result, people are being over-taxed by thousands of pounds. The taxman promises to repay within 30 days of receiving one of three complicated forms.

Last month, experts used an inquiry into the pension freedom reforms to call for the Government to intervene. The most recent figures show the value of refunds is at its highest level since the reforms were introduced in April 2015. In all, £262m of refunds have been made.

Tom Selby, of AJ Bell, the fund shop, branded the figure as “staggering” and said it was “manifestly unfair to lumber savers, who are using the freedoms in the way the Government intended, with whopping great tax bills”.

Mr Selby added: “Many of those affected – particularly basic-rate taxpayers and people who don’t take advice – will have little or no experience dealing with tax matters and might not even know the reclaim forms exist.”

If you think you’ve been over-taxed on your pension you need to fill out one of three HMRC forms: P55, P53Z or P50Z. The correct form depends on your circumstances.

P55 should be used if the withdrawal has not entirely emptied your pension pot; use P50Z if the withdrawal emptied your pot and you have stopped working; and use P53Z if you have emptied your pot and are still working.

Facebooktwittermail