The number of individuals accessing flexible pension payments has increased by 20% in Q3 2017.
HMRC’s quarterly flexible payments from pensions bulletin shows around 198,000 savers used pension freedoms to access their pension early – up from 158,000 in Q3 2016.
Around 435,000 payments were made in Q3 2017 – a record high since the taxman began recording data following the introduction of pension freedoms in April 2015.
The freedoms allow over-55s to take their entire pension pot as a lump sum, with the first 25% tax-free and the rest taxed as if it were income.
The total amount of flexible pension payments made in Q3 2017 also represented a 34% increase on the same quarter last year, rising from 324,000.
While the pension freedoms have benefitted thousands of individuals 2 years on from its launch, the Work and Pensions Select Committee launched an inquiry last month to see if they are working.
Under current rules, savers seeking to withdraw a lump sum from their pension pot are usually taxed on an emergency code which can result in a substantial overpayment.
Steve Webb, director of policy at Royal London, said:
“The way in which pension withdrawals are taxed is little short of a scandal.
“It cannot be right that HMRC can knowingly overtax people to the tune of £100 million per year.”