Tax Erodes Pension Income by 30%

FUTURE PROOF: Despite a greater tax-free personal allowance after the age of 65, pensioners are seeing their income eroded by up to a third in retirement

Emma Wall 4 June, 2014 | 11:52AM
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Pensioners are seeing their income eroded by as much as 30%, with retired households paying £45.6 billion a year to the tax man.

According to calculations by the Prudential, income tax, VAT and council tax are the biggest bills for pensioners, averaging £6,400 a year per retired household.

On retiring, Britons are awarded an increase in their tax-free personal income allowance from £10,000 to £10,500 for those aged 65 or older, or £10,660 for those aged 76 and older. But for those pensioners who earn more than £27,000 a year, due to pension income, savings interest or a wage this personal allowance is   reduced by half of the amount - £1 for every £2 - you have over the £27,000 limit.

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About Author

Emma Wall  is former Senior International Editor for Morningstar