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UK: Taxman takes 42bn pounds a year from pensioners...and the poorest households are hit hardest

02 August 2012   (0 Comments)
Posted by: SAIT Technical
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By Rob Preece (Daily Mail)

Pensioners in the UK are handing over almost £42billion a year to the taxman, with the average retired household paying almost a third of their income.

The typical retired household pays almost £6,000 annually in taxes ranging from council tax and income tax to fuel duty and the TV licence, according to research by insurer MetLife.

That equates to 29 per cent of the average pensioner income of £20,130 a year. The research findings are based on analysis of official figures relating to the UK's 7.15million retired households.

MetLife said direct taxes, including income tax and council tax, accounted for almost half of the tax burden faced by pensioners. The remainder relates to indirect taxes, such as VAT, duty on tobacco, alcohol and fuel, road tax and TV licences. Poor households were found to proportionally pay out the most in direct and indirect tax, with 42 per cent of their gross household income being swallowed up.
The bottom tenth of pensioner households, with a gross income put at £8,259 a year, paid an estimated £3,599 in taxes.

The top 10 per cent of pensioner households, who receive an average of £47,992 gross, saw 29 per cent of their income going in direct and indirect tax, in line with the proportion seen by average households.

Pensioners have been badly hit by the longest double-dip recession since quarterly records began in 1955, as high living costs and low interest rates have eaten away at their savings.

A study by Aviva earlier this month found that saving pots for the over-75s had almost halved in the last two years, to just under £13,000.

The Aviva report also highlighted a 'concerning' finding that almost a quarter of people

The top 10 per cent of pensioner households, who receive an average of £47,992 gross, saw 29 per cent of their income going in direct and indirect tax, in line with the proportion seen by average households.

Pensioners have been badly hit by the longest double-dip recession since quarterly records began in 1955, as high living costs and low interest rates have eaten away at their savings.

A study by Aviva earlier this month found that saving pots for the over-75s had almost halved in the last two years, to just under £13,000.

The Aviva report also highlighted a 'concerning' finding that almost a quarter of people over 75 had a credit card debt they did not repay in full on a monthly basis, despite the fact they were likely to have retired a decade earlier.

Analysts also said that recent rounds of quantitative easing had made more than a million pensioners worse off, by driving down annuity rates, which set the size of a pensioner's income for life.

Eddie O'Gorman, of investment specialists the WAY Group, told the Daily Express: 'This is one of the most vulnerable economic groups in our society.
'Surely they should be getting better tax breaks rather than being hit for high levels of taxation at a time in their lives when they can least afford it.'

Tom McPhail, head of pensions research at investment brokers Hargreaves Lansdown, said: 'With pensioners set to form an increasing proportion of the population and with the Treasury struggling to balance its books, it wouldn't surprise me to see pensioners' tax burden increasing in the years to come.'



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