Latest news with #PensionsUK
Daily Mirror
2 days ago
- Business
- Daily Mirror
'Stealth' tax alert for pensioners who face £15k burden by 2030
Brits planning to retire may need additional retirement savings if the personal allowance tax freeze is extended New data suggests that those planning to retire in 2030 and beyond could need to save around £15,000 if the personal allowance tax freeze is extended. This increased cost of maintaining their current lifestyle is attributed to fiscal drag, which is a consequence of rising state pensions, escalating living costs, and frozen personal allowances. Pensions UK's latest Retirement Living Standards report reveals that a single pensioner currently needs an annual income of around £43,900 for a comfortable retirement. However, this figure is predicted to soar to over £58,800 in just five years' time to maintain the same standard of living. It's important to note that this £14,960 increase is projected by 2030 if the freeze on personal allowance and income tax thresholds persists. Right now, the personal allowance allows most people to earn £12,570 each year before they're liable for income tax. However, this has been frozen until 2028, and according to the Telegraph, Sir Keir Starmer hasn't ruled out the possibility of extending this freeze even further. During Prime Minister's Questions on Wednesday, the PM reassured that he plans to honour Labour's manifesto pledge not to raise taxes for working people. However, he avoided answering questions about whether the halt on income tax thresholds would continue beyond 2028, reports the Express. Experts widely acknowledge this as a 'stealth' tax, which doesn't directly raise taxes but instead quietly pushes people into higher income tax brackets as wages and benefits climb with inflation over time. This process, commonly referred to as fiscal drag, might eventually make the state pension subject to tax in years to come. Although the state pension isn't automatically tax-free, it presently sits below the personal allowance limit, meaning it avoids taxation altogether. Given that the triple lock ensures a minimum yearly rise of 2.5% and the current full new state pension stands at £11,973, pensioners could find themselves paying tax solely on their state pension if the freeze continues over the coming years. Alan Barral, a financial planner at Quilter Cheviot, warned the Telegraph: "Frozen income tax thresholds may feel like a technical detail, but they have real consequences for retirees whose standard of living is being squeezed." He added concerns about the Government's commitment, saying: "With the UK facing significant fiscal challenges, there's a real risk that Rachel Reeves may feel compelled to backtrack on Labour's pledge to unfreeze thresholds." A government spokesman responded to the publication and said: "We are committed to helping our pensioners live their lives with dignity and respect, which is why in April the basic and new state pension increased by 4.1pc. Pensioners will receive a boost of up to £470 to their income in 2025-26. Our commitment to the triple lock means millions will see their pension rise by up to £1,900 this parliament."
Scottish Sun
3 days ago
- Business
- Scottish Sun
Why Labour's economy plan means you'll need even MORE to retire
Click to share on X/Twitter (Opens in new window) Click to share on Facebook (Opens in new window) PENSIONERS will need to spend £15,000 a year more to have a comfortable retirement if Labour extends its stealth tax raid, analysis shows. Income tax thresholds were frozen until 2028 by the Conservative government. Sign up for Scottish Sun newsletter Sign up 2 Pensioners will need £15,000 more a year to afford a comfortable retirement Credit: Alamy 2 Source: Pensions UK But the prime minister has not yet ruled out extending the thresholds beyond this date as he attempts to fill a £22billion black hole in the public finances. A single pensioner currently needs a disposable income of £43,900 a year to have a comfortable retirement, according to industry trade body Pensions UK. But if the tax thresholds were frozen for two more years and higher living costs continue to rise then it would mean this figure would rise to £58,860 by 2030. As a result, pensioners would need £14,960 more a year than they do now. A comfortable retirement would allow you to spend £75 a week on food and £21 a week on takeaways, assuming that you own your own home and are mortgage free. In comparison, in 2020-21 you needed just £32,800 for a comfortable retirement. But the soaring cost of living has pushed up the amount you need each year to £43,900. As the cost of energy, food, driving and holidays have risen, pensioners currently need a higher income each year to make ends meet. If the amount of disposable income pensioners need continues to rise by the annual average of 6% each year and the income tax thresholds remain frozen then a pensioner would need £58,860 to live comfortably. Frozen tax thresholds have dragged millions of people into higher tax bands through a concept known as 'fiscal drag'. How to track down lost pensions worth £1,000s Craig Rickman, personal finance expert at Interactive Investor, says: 'Fiscal drag is a sneaky tactic of raising the tax burden over time, as it freezes tax thresholds so that people pay more of their income as wages rise with inflation. 'While it's not as obvious as raising tax rates directly, it could have a bigger impact over long periods – particularly when you see the length of time that some of these rates have been frozen.' He added that as tax thresholds are frozen for so long even lower earners will gradually pay tax on their income. Meanwhile, u-turns over the winter fuel payment for pensioners and plans to cut disability benefits have left pensioners feeling uncertain about their finances. How to save for retirement Anyone planning their retirement needs to do some careful calculations about how much they will need to afford the lifestyle they want. A good starting point is the government's state pension age calculator, which will tell you when you will receive your state pension. Visit to find out more. Pension calculators can also help you determine how much money you need to save to have the pension pot you want at retirement. The earlier you start saving, the easier it is as your money grows longer. And you're not on your own when saving for retirement. Your workplace will almost certainly contribute some money to your pension pot, too, and you get tax relief from the government, which reduces the amount you have to pay yourself. If you are struggling to make ends meet then don't worry, we have revealed how to legally pay less tax on your income. Plus our guide explains how to give yourself a secret pay rise and get up to £240,000 extra in retirement. Or if you are a grandparent then you could get a £6,600 boost for looking after children during the summer holidays. When can I retire? IF you're wondering when you can retire, it's best to speak to your pension providers. Firstly, use the government's tool to check your state pension age. Next check retirement ages on workplace pension schemes - this can massively impact your windfall once you enter your golden years. For advice, you can contact The Pensions Advisory Service for free online or on 0800 011 3797. Do you have a money problem that needs sorting? Get in touch by emailing money-sm@ Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories
The Sun
3 days ago
- Business
- The Sun
Why Labour's economy plan means you'll need even MORE to retire
PENSIONERS will need to spend £15,000 a year more to have a comfortable retirement if Labour extends its stealth tax raid, analysis shows. Income tax thresholds were frozen until 2028 by the Conservative government. 2 2 But the prime minister has not yet ruled out extending the thresholds beyond this date as he attempts to fill a £22billion black hole in the public finances. A single pensioner currently needs a disposable income of £43,900 a year to have a comfortable retirement, according to industry trade body Pensions UK. But if the tax thresholds were frozen for two more years and higher living costs continue to rise then it would mean this figure would rise to £58,860 by 2030. As a result, pensioners would need £14,960 more a year than they do now. A comfortable retirement would allow you to spend £75 a week on food and £21 a week on takeaways, assuming that you own your own home and are mortgage free. In comparison, in 2020-21 you needed just £32,800 for a comfortable retirement. But the soaring cost of living has pushed up the amount you need each year to £43,900. As the cost of energy, food, driving and holidays have risen, pensioners currently need a higher income each year to make ends meet. If the amount of disposable income pensioners need continues to rise by the annual average of 6% each year and the income tax thresholds remain frozen then a pensioner would need £58,860 to live comfortably. Frozen tax thresholds have dragged millions of people into higher tax bands through a concept known as 'fiscal drag'. Craig Rickman, personal finance expert at Interactive Investor, says: 'Fiscal drag is a sneaky tactic of raising the tax burden over time, as it freezes tax thresholds so that people pay more of their income as wages rise with inflation. 'While it's not as obvious as raising tax rates directly, it could have a bigger impact over long periods – particularly when you see the length of time that some of these rates have been frozen.' He added that as tax thresholds are frozen for so long even lower earners will gradually pay tax on their income. Meanwhile, u-turns over the winter fuel payment for pensioners and plans to cut disability benefits have left pensioners feeling uncertain about their finances. How to save for retirement Anyone planning their retirement needs to do some careful calculations about how much they will need to afford the lifestyle they want. A good starting point is the government's state pension age calculator, which will tell you when you will receive your state pension. Visit to find out more. Pension calculators can also help you determine how much money you need to save to have the pension pot you want at retirement. The earlier you start saving, the easier it is as your money grows longer. And you're not on your own when saving for retirement. Your workplace will almost certainly contribute some money to your pension pot, too, and you get tax relief from the government, which reduces the amount you have to pay yourself. If you are struggling to make ends meet then don't worry, we have revealed how to legally pay less tax on your income. Plus our guide explains how to give yourself a secret pay rise and get up to £240,000 extra in retirement. Or if you are a grandparent then you could get a £6,600 boost for looking after children during the summer holidays. Do you have a money problem that needs sorting? Get in touch by emailing money-sm@
Telegraph
4 days ago
- Business
- Telegraph
Stealth tax raid to add £15k to cost of a ‘comfortable' retirement
Pensioners will need to spend nearly £15,000 more to live comfortably in retirement if Labour extends its stealth raid on incomes, analysis shows. Income tax thresholds are frozen until 2028, but Sir Keir Starmer has refused to rule out extending the freeze beyond this date. A single pensioner needs disposable income of £43,900 for a 'comfortable' retirement today, according to trade body Pensions UK. But higher living costs and a two-year extension to the tax threshold freeze would mean this figure rising to £58,860 by 2030 – £14,960 more than today. Income tax thresholds were frozen from 2021 until 2028 under the Tories. The policy has dragged millions more taxpayers, including pensioners, into higher brackets as inflation pushes up incomes in a process known as 'fiscal drag'. Rachel Reeves has committed to keeping thresholds frozen until at least 2028. But the Chancellor and the Prime Minister have refused to rule out an extension as the Government fights to fill a £22bn fiscal 'black hole'. A 'comfortable' retirement is defined by Pensions UK as having enough money for luxuries such as regular beauty treatments, theatre trips and a two-week holiday in Europe every year, with around £70 to spend on groceries and £60 on meals out per week. It assumes the retiree owns their own home and is mortgage-free. In 2019-20, £33,000 of expenditure was needed for a single pensioner to maintain this lifestyle, requiring an income of £38,125. However, the rising cost of energy, groceries, holidays and driving means they now need to spend £43,900 a year to achieve a 'comfortable' retirement, requiring an income of £52,220. If the disposable income required continues to rise by the annual average of 6pc each year, and income tax thresholds remain frozen, the same pensioner will need to spend £58,860 by 2030, requiring an income of £77,153. Sir Keir told Prime Minister's Questions on Wednesday that he stood by his party's manifesto pledge not to raise taxes on working people. But he refused to say whether the freeze on income tax thresholds would be extended beyond the 2028 expiry date. The freeze is considered a stealth tax as it raises revenue for the Treasury without increasing headline income tax rates. U-turns on winter fuel payments for pensioners and cutting disability benefits have piled pressure on the Government's spending plans, with economists saying tax rises are now likely in the autumn Budget. Alan Barral, financial planner at Quilter Cheviot, said: 'Frozen income tax thresholds may feel like a technical detail, but they have real consequences for retirees whose standard of living is being squeezed. 'As incomes creep up to keep pace with inflation, more of that income ends up being taxed, effectively reducing spending power year after year. 'With the UK facing significant fiscal challenges, there's a real risk that Rachel Reeves may feel compelled to backtrack on Labour's pledge to unfreeze thresholds.' Baroness Altmann, a former pensions minister, warned that an extension of the freeze would have the greatest impact on the poorest retirees whose state pensions would start to breach the £12,570 tax-free personal allowance. She added: 'Taxing these pensioners for perhaps a few pennies will be an administrative nightmare and cause distress and upset. 'The longer thresholds are frozen the more people will be dragged into the tax net – and the more people will really suffer.' A government spokesman said: 'We are committed to helping our pensioners live their lives with dignity and respect, which is why in April the basic and new state pension increased by 4.1pc. 'Pensioners will receive a boost of up to £470 to their income in 2025-26. Our commitment to the triple lock means millions will see their pension rise by up to £1,900 this parliament.'
