More than £42mn was returned to pensioners for overpaid tax in the first quarter of 2024.
The latest figures from HMRC showed more than 13,000 claim forms were processed between January and March 2024.
Ian Cook, chartered financial planner at Quilter called it an "archaic system" that leaves people waiting and needs to be overhauled.
The reason for this is due to people being placed on an emergency tax code when they first withdraw from their pension pot.
Cook said: "This has caused a significant issue for those who are accessing their pension funds for years and has been exacerbated by the strain that the cost of living crisis has had on people’s finances over the last year or so.
"The system is desperately in need of an overhaul as, at present, the process is leaving people facing unnecessary emergency tax and adding additional strain at a time when many are still struggling with the cost of living."
He added there are steps people accessing their pensions for the first time can take to avoid the emergency tax.
"Wherever possible, you should speak to a professional financial planner who can help reduce the risk of paying excessive tax upfront that you would otherwise need to reclaim," said Cook.
"You can achieve this via several smaller withdrawals, as opposed to an initial lump sum. This ensures that most of the withdrawal utilises an updated tax code, preventing emergency taxation on the full amount."
Under pension freedom rules people aged 55 plus can freely access their cash.
But any withdrawals above the 25 per cent tax free amount are taxable at an individual's marginal rate of income tax.
Where the provider does not have the correct tax code - which is in the majority of cases - withdrawals are taxed using a higher rate emergency tax code.
This routinely results in an excessive tax deduction that has to be reclaimed later.
There are three forms - P55, P53Z and P50Z - that allow people to claim back money mid-way through the tax-year.
tara.o'connor@ft.com
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