Tax 

More pensioners paying higher rate tax

More pensioners paying higher rate tax

The number of individuals over the state pension age paying 45 per cent of income tax has increased by almost 10 per cent over the past three years.

According to figures from the government, 37,000 pensioners over the state pension age had tax liabilities charged at the additional rate of 45 per cent in 2018-19, up from 34,000 in 2016-17.

In comparison the number of pensioners who are higher rate taxpayers, paying 40 per cent in income tax, has dropped by 5 per cent over the past three years from 537,000 in 2016-17 to 508,000 in 2018-19.

The data was revealed on Monday (July 15) by Lord Young of Cookham in a written Parliamentary response to Baroness Ros Altmann, former pensions minister, who also asked the government to provide data on how many pensioners had an annual income above £50,000 in each of the past three years.

The data showed that there has been a 13 per cent increase in the number of pensioners with incomes above £50,000, with 418,000 earning above this threshold in 2016-17 compared with 474,000 in 2018-19.

However, more men have an income of over £50,000 than women. 

In 2018-19, three quarters of the high earning pensioners were made up of men (76 per cent) compared to 24 per cent of women.

Estimates of the number of pensioners who had an annual income above £50,000:

 

2016-17

2017-18

2018-19

Male

311

342

361

Female

107

110

113

Total

418

451

474

Out of the 474,000 pensioners with an income over £50,000, 158,000 (33 per cent) were over the age of 75 compared to 170,000 (36 per cent) being between the ages of 65 and 69.

Last week research from Zurich found that one in four (26 per cent) retirees returned to work after dipping into their pension because they were struggling financially.

The analysis from Zurich, which polled 2028 adults who have accessed their defined contribution pension, found that one in 10 (11 per cent) had gone back to either full or part time work, or said that they intended to.  

According to the government, the average female state pension age used to gather the data was 63.75 years in 2016-17 and 64.5 years in 2017-18 (the male state pension age was 65 in both). The average male and female state pension age in 2018-19 is 65.25.

The state pension age is currently 65 for both men and women. From December 2018 it will rise until it reaches 66 in October 2020 and 67 between 2026 and 2028.

Plans to increase the state pension age for women were first announced in the Pension Act 1995 but these changes were accelerated as part of the Pension Act 2011.

Campaign groups The Women Against State Pension Inequality and Backto60 have claimed these changes were implemented unfairly, with little or no personal notice.

The groups, which are calling for compensation for those affected, have also claimed that changes were implemented faster than promised with the 2011 Pension Act and left women with no time to make alternative plans, leading to devastating consequences.

However, the government has stated that reversing the hike in womens’ state pension age back to 60, as they have called for, would cost the public purse more than £180bn.