Mutations in PANK2 lead to neurodegeneration with brain iron accumulation. PANK2 has a role in the biosynthesis of coenzyme A (CoA) from dietary vitamin B5, but the neuropathological mechanism and reasons for iron accumulation remain unknown. In this study, atypical patient-derived fibroblasts were reprogrammed into induced pluripotent stem cells (iPSCs) and subsequently differentiated into cortical neuronal cells for studying disease mechanisms in human neurons. We observed no changes in PANK2 expression between control and patient cells, but a reduction in protein levels was apparent in patient cells. CoA homeostasis and cellular iron handling were normal, mitochondrial function was affected; displaying activated NADH-related and inhibited FADH-related respiration, resulting in increased mitochondrial membrane potential. This led to increased reactive oxygen species generation and lipid peroxidation in patient-derived neurons. These data suggest that mitochondrial deficiency is an early feature of the disease process and can be explained by altered NADH/FADH substrate supply to oxidative phosphorylation. Intriguingly, iron chelation appeared to exacerbate the mitochondrial phenotype in both control and patient neuronal cells. This raises caution for the use iron chelation therapy in general when iron accumulation is absent.