Pensioners are paying £2,700 more in tax to live comfortably compared to four years ago thanks to a stealth raid on incomes, the Telegraph reports.
Thousands of pensioners are being slapped with a £2,729 bill “simply to stand still”. Pensioners are paying £2,700 more in tax to live comfortably compared to four years ago thanks to a stealth raid on incomes, the Telegraph reports.
A single pensioner had to pay £5,058 in income tax in 2020-21 to reach the level of expenditure needed for a “comfortable” retirement. But higher living costs and frozen tax thresholds mean retirees are being stung with rising tax bills to achieve the same lifestyle.
A pensioner would have had to pay £7,787 in tax in 2023-24 to reach this benchmark – a £2,729 rise. Jon Greer, head of retirement policy at Quilter, said the findings demonstrated that fiscal drag was “quietly reshaping” the pensions landscape.
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Although the state pension is taxed, it is not taxed at the point of payment. Instead, HMRC applies tax through the pensioner’s tax code, often collecting it from other sources like private pensions. This method can lead to confusion and surprise tax bills, particularly for those who only recently began receiving both state and private pension income.
Analysis by Sir Steve Webb, a former pensions minister, found that before April 2025, around 249,000 pensioners were already paying at least £1,000 in tax on their state pensions alone. Of these, over 10,000 retirees were paying £2,000 or more.
Mr Greer added: “Retirees are increasingly finding themselves caught paying ever increasing amounts of tax. The cost of maintaining a decent standard of living in retirement has risen sharply in recent years, yet income tax thresholds have remained unchanged.
“As a result, pensioners are now paying significantly more tax than they were just a few years ago — not because their incomes have grown, but because the system hasn’t kept pace with inflation.
“This creeping tax burden risks undermining retirement security for thousands of people who did everything right. They saved diligently, planned carefully, and expected a stable system in return. Instead, they are being taxed more heavily simply to stand still.”
The new “full” state pension rose to £11,973 this month thanks to a 4.1 per cent “triple lock” pay rise.
