State pensioners could be slapped with ‘stealth tax’
Martin Lewis shares advice on pension credit payments
Experts are warning that pensioners are at risk of being slapped with an expensive “stealth tax”.
The Government’s freeze on tax allowance and thresholds may result in retirees being in tougher financial circumstances, according to Senior Capital.
This measure was brought in as part of an initiative aimed at generating up to £75billion every year in tax from 2027-28.
However, it will also result in the state pension amount overtaking the income tax threshold for the first time since its inception.
As such, many low-income older households who rely on the state pension will be considered about the prospect of being liable for more tax.
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Next year, under the triple lock, the state pension is expected to rise by £901.02 to £11,501.22 a year.
In comparison, the basic state pension will jump next year by £690.40 to £8,812.80 if the 8.5 percent rate hike is implemented.
As it stands, the standard Personal Allowance for taxpayers remains at £12,570, which is the amount of income people do not have to pay tax on.
However, if the triple lock remains in place, concerns are being raised that the annual state pension will exceed this amount.
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Currently, over 3.5 million people aged 50-64 across the UK are classified as ‘economically inactive’, with the cost of living crisis resulting in many postponing their retirement plans.
To pay for life postwork, some have turned to equity release to access frozen capital during this challenging economic time.
The current total for the year is sitting at around £5billion which shows much of the population is struggling financially.
Data from the Equity Release Council revealed that over 55s have taken out a record 13,452 new equity release plans between July and September, drawing a total of £1.7bn out of their properties in the third quarter of the year.
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Rudy Khaitan, the managing partner of Senior Capital, broke down why this is increasingly becoming an option for pensioners.
He explained: “Equity release is more than a financial tool; it’s a lifeline for pensioners who find themselves caught in the grip of a cost-of-living crisis.
“It’s about giving them the freedom to unlock the wealth they’ve built up in their homes, and providing them with the means to live with dignity and security in their golden years.
“In a world where the costs of everyday essentials are soaring and traditional forms of retirement income can’t keep up, equity release can be a vital support, ensuring that the senior members of our society can enjoy the quality of life they’ve worked so hard to achieve.”
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