Over-65s pay 11% of the UK’s income tax bill according to figures released by Prudential.
The insurance company analysed Office for National Statistics data on tax and income and found that pensioners pay around £17.5 billion in income tax each year. In the 2012/13 tax year, over-65s paid an average of £3,258 individually.
The average tax bill for pensioners is £2,300 lower than it is for under-65s, except in London where the difference is significantly smaller, at £692.
Pensioners in the capital also pay a higher rate of income tax then their peers across the country, paying an average income tax bill of £8,386. This is over £5,000 higher than the national average.
The effects of the pension reforms introduced this year will have further effects on the tax bill for retirees. The treasury estimated in December 2014 that the new rules will bring in an additional £380 million in revenue during the 2015-16 tax year.
Stan Russell, retirement income expert at Prudential, said:
“These figures show that just because someone has retired from work doesn’t mean they have retired from paying tax, so taking into account the impact on retirement income is an important part of planning for a comfortable retirement.
“It is great news that the pension freedoms that came into force earlier in the year now provide many pension savers with a greater degree of choice when it comes to providing for their retirement.
“Some of the options come with a significant tax bill attached. Therefore taking professional advice before deciding to cash in a pension pot will help most people to make the most of the new options.”
Talk to a member of our team about retirement planning.