Younger pensioners take full force of new tax blow
Gordon Browns’ Budget, as well as making the lowest paid worse off with the abolition of the 10p minimum tax band, has meant that pensioners at the lower end of the age spectrum will also be poorer.
He announced that personal tax allowances for pensioners will increase to protect them from the loss of the 10% band, which does not help those who retire early, or women between 60 and 65, because they do not qualify for the higher allowances.
These people will be limited to their basic personal allowance, which is £5,225 for the coming year.
John Whiting, tax partner at PricewaterhouseCoopers, said: “Those who retire in their late 50s and early 60s who do not qualify for a higher personal allowance will lose out.”
And retired financial adviser Peter Stanway said: “The new tax regime is extremely confusing to my mind and people now have to consider their best pension options very carefully.
“The year starting 2008 will double some pensioners’ tax bills, because the abolition of the 10% tax rate will affect pension income but not savings income.”
He concluded: “For a Labour Government to hit the harder off like this is disgraceful to my mind. One of the great inducements to save for a pension was the tax benefit – but if this is effectively withdrawn then all of that was just nonsense.”