Martin Lewis has revealed a mistake pension holders are making that could be costing them thousands in tax.

The cash-saving guru presents the Martin Lewis Money Show on ITV every Thursday at 8:30pm.

This week, the Money Saving Expert founder decided to focus on pensions advice, sharing tips and tricks with viewers.

Mr Lewis explained how people are paying thousands in tax which they don't necessarily need to. 

He said: "You can leave your money invested in your pension pot. Then, when you take it out, a quarter of it is tax free.

"Three quarters of it is taxed at your marginal rate - in other words, the highest rate of income tax you are paying at that time.

"Now here is the issue: if you take your money out of your pension, if you take it all out at the same time or you take it out in bits, you cannot say 'I want the interest bit now, please, and I will take the rest later'.

"I use a Swiss roll as an analogy. You can have a slice. The jam is tax free - a quarter of it is tax free, three quarters of it is taxed - you have to have both.

"Now the problem with that, let us say you are taking £20,000 out and you are a basic rate tax payer, the three quarters of that that is taxed is added on top and could push you into a higher tax bracket.

He added: "So you are paying thousands of pounds of tax that you need not do because there is an alternative route. You can take your whole 25 per cent tax free lump sum if you put the rest in income drawdown, which is an investment product you can take money out of when you need.

"Or you can put the rest in an annuity, which pays you a set income each year for the rest of your life."