Pensioner squeeze – spending money after | U.Ok.Finance News
Pensioners are dealing with a brutal squeeze on their funds as their disposable incomes tumble to the bottom degree in a decade, official figures have revealed.The average retiree now has simply £569 a week – or £29,588 a 12 months – in actual phrases post-tax income, down from a peak of £599 a week in 2020-21.That 12 months marked the beginning of a quiet however deeply damaging tax raid by the Government, as ministers froze income tax thresholds in a transfer that has steadily dragged more older people into the tax web.The figures, from the Department for Work and Pensions (DWP), lay naked the growing financial pressure on hundreds of thousands of retirees.Pensioner incomes have been steadily eroded by a poisonous mixture of rising residing prices and frozen tax bands imposed by successive Tory and Labour governments, with some 700,000 more pensioners anticipated to face an income tax invoice for the primary time subsequent 12 months.Experts say the stealth tax is forcing many older people to tighten their belts simply to remain afloat. What’s more, Chancellor Rachel Reeves has confirmed the edge freeze will stay in place till at the least 2027-28 – a transfer prone to deepen the squeeze.In money phrases, pensioners’ pre-tax incomes have crept up modestly over the previous decade – from £656 a week in 2013-14 to £688 final 12 months. But that modest growth has been outpaced by inflation, and more importantly, eaten away by tax.Separate evaluation suggests wealthier retirees now need an further £2,729 a 12 months simply to take care of the identical normal of residing they loved 4 years in the past. Much of this shortfall is down to tax, because the rising state pension edges nearer to breaching the personal allowance threshold – which means pensioners at the moment are taxed on money the state offers them to outlive.Tom Selby, of investment firm AJ Bell, warned: “While the controversial triple lock continues to boost the value of the state pension, frozen income tax thresholds are working in the opposite direction.“It means those with rising incomes in retirement, such as defined benefit members with inflation protection baked into their pensions, will see larger chunks of this money eaten away by income tax.“It is also possible that we have reached the peak of the ‘baby boomer’ generation hitting retirement.Experts also warn that we may be witnessing the twilight of the so-called ‘golden generation’. Many of today’s pensioners benefited from generous defined benefit schemes, final salary pensions, and full home ownership – a combination that provided real financial security in retirement.But that’s fast disappearing. Younger generations, saddled with high housing costs and patchier workplace pensions, face a bleaker future.Jon Greer, head of retirement policy at Quilter, told the Telegraph the figures should be seen as a “wake-up call”.“After a decade of relative stability, pensioners’ spending power is starting to be eroded. Rising prices, frozen tax thresholds and limited flexibility in income all combine to erode their standard of living.“What’s worrying is that this comes at a time when older people are also facing higher energy and care costs, making it even harder to maintain a decent quality of life in retirement.”The triple lock has turn into a political soccer in recent times. Designed to make sure the state pension retains tempo with inflation or wage growth, whichever is increased, it has led to bumper will increase – with one other £1,900 rise due this Parliament.But satirically, the identical measure is now pushing more retirees into paying tax on their pension income. The new full state pension is projected to breach the £12,570 personal allowance by 2028, which means even these relying solely on the state pension might discover themselves paying income tax.Adding to the stress, Labour final 12 months introduced modifications to the winter fuel allowance. The benefit, value up to £300, is now means-examined and accessible solely to these on pension credit – stripping help from hundreds of thousands of middle-income retirees.The Treasury insists it’s serving to older people. A spokesman mentioned: “We are committed to helping our pensioners live their lives with dignity and respect. That’s why we have frozen fuel duty and increased the state pension, leaving pensioner couples up to £88 better off a month.”
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