diff --git a/compiler/src/dotty/tools/dotc/cc/CaptureOps.scala b/compiler/src/dotty/tools/dotc/cc/CaptureOps.scala
index 7c75ed833945..deeb474f018a 100644
--- a/compiler/src/dotty/tools/dotc/cc/CaptureOps.scala
+++ b/compiler/src/dotty/tools/dotc/cc/CaptureOps.scala
@@ -445,6 +445,14 @@ extension (tp: AnnotatedType)
     case ann: CaptureAnnotation => ann.boxed
     case _ => false
 
+/** Drop retains annotations in the type. */
+class CleanupRetains(using Context) extends TypeMap:
+  def apply(tp: Type): Type =
+    tp match
+      case AnnotatedType(tp, annot) if annot.symbol == defn.RetainsAnnot || annot.symbol == defn.RetainsByNameAnnot =>
+        RetainingType(tp, Nil, byName = annot.symbol == defn.RetainsByNameAnnot)
+      case _ => mapOver(tp)
+
 /** An extractor for `caps.reachCapability(ref)`, which is used to express a reach
  *  capability as a tree in a @retains annotation.
  */
diff --git a/compiler/src/dotty/tools/dotc/transform/PostTyper.scala b/compiler/src/dotty/tools/dotc/transform/PostTyper.scala
index 3bcec80b5b10..a977694ded27 100644
--- a/compiler/src/dotty/tools/dotc/transform/PostTyper.scala
+++ b/compiler/src/dotty/tools/dotc/transform/PostTyper.scala
@@ -19,6 +19,7 @@ import config.Feature
 import util.SrcPos
 import reporting.*
 import NameKinds.WildcardParamName
+import cc.*
 
 object PostTyper {
   val name: String = "posttyper"
@@ -279,6 +280,21 @@ class PostTyper extends MacroTransform with InfoTransformer { thisPhase =>
       if !tree.symbol.is(Package) then tree
       else errorTree(tree, em"${tree.symbol} cannot be used as a type")
 
+    // Cleans up retains annotations in inferred type trees. This is needed because
+    // during the typer, it is infeasible to correctly infer the capture sets in most
+    // cases, resulting ill-formed capture sets that could crash the pickler later on.
+    // See #20035.
+    private def cleanupRetainsAnnot(symbol: Symbol, tpt: Tree)(using Context): Tree =
+      tpt match
+        case tpt: InferredTypeTree
+        if !symbol.allOverriddenSymbols.hasNext =>
+          // if there are overridden symbols, the annotation comes from an explicit type of the overridden symbol
+          // and should be retained.
+          val tm = new CleanupRetains
+          val tpe1 = tm(tpt.tpe)
+          tpt.withType(tpe1)
+        case _ => tpt
+
     override def transform(tree: Tree)(using Context): Tree =
       try tree match {
         // TODO move CaseDef case lower: keep most probable trees first for performance
@@ -388,7 +404,7 @@ class PostTyper extends MacroTransform with InfoTransformer { thisPhase =>
           registerIfHasMacroAnnotations(tree)
           checkErasedDef(tree)
           Checking.checkPolyFunctionType(tree.tpt)
-          val tree1 = cpy.ValDef(tree)(rhs = normalizeErasedRhs(tree.rhs, tree.symbol))
+          val tree1 = cpy.ValDef(tree)(tpt = cleanupRetainsAnnot(tree.symbol, tree.tpt), rhs = normalizeErasedRhs(tree.rhs, tree.symbol))
           if tree1.removeAttachment(desugar.UntupledParam).isDefined then
             checkStableSelection(tree.rhs)
           processValOrDefDef(super.transform(tree1))
@@ -398,7 +414,7 @@ class PostTyper extends MacroTransform with InfoTransformer { thisPhase =>
           checkErasedDef(tree)
           Checking.checkPolyFunctionType(tree.tpt)
           annotateContextResults(tree)
-          val tree1 = cpy.DefDef(tree)(rhs = normalizeErasedRhs(tree.rhs, tree.symbol))
+          val tree1 = cpy.DefDef(tree)(tpt = cleanupRetainsAnnot(tree.symbol, tree.tpt), rhs = normalizeErasedRhs(tree.rhs, tree.symbol))
           processValOrDefDef(superAcc.wrapDefDef(tree1)(super.transform(tree1).asInstanceOf[DefDef]))
         case tree: TypeDef =>
           registerIfHasMacroAnnotations(tree)
diff --git a/tests/neg-custom-args/captures/byname.check b/tests/neg-custom-args/captures/byname.check
index 226bee2cd0e5..e06a3a1f8268 100644
--- a/tests/neg-custom-args/captures/byname.check
+++ b/tests/neg-custom-args/captures/byname.check
@@ -9,7 +9,7 @@
    |  Found:    (x$0: Int) ->{cap2} Int
    |  Required: (x$0: Int) -> Int
    |
-   |  Note that the expected type Int => Int
+   |  Note that the expected type Int ->{} Int
    |  is the previously inferred result type of method test
    |  which is also the type seen in separately compiled sources.
    |  The new inferred type (x$0: Int) ->{cap2} Int
diff --git a/tests/pos-custom-args/captures/tablediff.scala b/tests/pos-custom-args/captures/tablediff.scala
new file mode 100644
index 000000000000..244ee1a46a23
--- /dev/null
+++ b/tests/pos-custom-args/captures/tablediff.scala
@@ -0,0 +1,11 @@
+import language.experimental.captureChecking
+
+trait Seq[+A]:
+  def zipAll[A1 >: A, B](that: Seq[B]^, thisElem: A1, thatElem: B): Seq[(A1, B)]^{this, that}
+  def map[B](f: A => B): Seq[B]^{this, f}
+
+def zipAllOption[X](left: Seq[X], right: Seq[X]) =
+  left.map(Option(_)).zipAll(right.map(Option(_)), None, None)
+
+def fillRow[T](headRow: Seq[T], tailRow: Seq[T]) =
+  val paddedZip = zipAllOption(headRow, tailRow)