You are here: Home - Household Bills - News -

Pensioners lose third of income to taxman

0
Written by:
30/05/2014
The average retired household pays out 30 per cent of its annual income in taxes, according to research.

Analysis of Office for National Statistics (ONS) data by Prudential found that in the 2011-2012 tax year, the average retired household paid £6,400 in tax from a gross income of £21,300. That equates to a total of £45.6bn paid in taxes by all retired households.

Stan Russell, retirement income expert at Prudential, said: “Retiring from work doesn’t mean that you are retiring from paying tax. Whether you are liable for income tax or you are paying VAT on your purchases, the contributions you make to the Exchequer will continue throughout your retirement.”

VAT and income tax are the largest duties retirees find themselves paying – each consuming eight per cent of the average retired household’s annual income. Council tax accounts for around four per cent.

Indirect taxes other than VAT, including vehicle excise duty, taxes on alcohol, tobacco and petrol, combine to take a further 10 per cent.

Russell said the changes to pensions and how people can take their retirement income announced in the Budget will provide savers and retirees with more choices and will affect the way that tax is applied.

“Irrespective of these changes, the fundamental principles remain true – the best way to secure your desired level of retirement income is to save as much as possible as early as possible in your working life,” he added.

Previous research by Prudential found that retirees are becoming more optimistic about the income they expect to receive when they stop working.

However, the insurer said these latest figures are a stark reminder that “not all the income you receive in retirement will be yours to spend as you like”.

Tag Box

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Big flu jab price hikes this winter: Where’s cheapest if you can’t get a free vaccine?

Pharmacies, supermarkets and health retailers are starting to offer flu jabs ahead of the winter season, but t...

Is now the time to fix your energy deal?

Fixed energy tariffs all but disappeared during the energy crisis. But now they are back with an increasing nu...

Everything you need to know about the pension triple lock

Retirees are braced to receive another bumper state pension pay rise next year due to the triple lock mechanis...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

The best student bank accounts in 2023: Cash offers, tastecards and 0% overdrafts

A number of banks are luring in new student customers with cold hard cash this year – while others are compe...

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Money Tips of the Week