UK pensioners are paying £34bn in tax according to research from MetLife.
The provider's analysis shows the average pensioner pays 27% if their gross household income in a combination of indirect and direct taxes. This rises to 33% for the poorest pensioners.
Dominic Grinstead, managing director of MetLife Europe Limited UK said: "Tax does not end when you stop working and 27% of gross retirement income being swallowed up by tax is a major factor to consider when planning for retirement."
The average gross pensioner household income is £18,834 with an annual tax liability of £5,124. Income tax accounts for nearly £1,300 of the bill.
Indirect taxes including VAT and duty on tobacco, alcohol and petrol total £2,966 of the outgoings. Council tax is the third largest tax burden accounting for 4.5% of gross income.
The bottom fifth of pensioner households, in receipt of income approximately £9,445 a year, pay £3,175 in taxes. This equates to 33% of their gross income. Metlife's product marketing director Peter Carter attributed this to ‘lower incomes have to spend more of their money and it's all VAT-able', pointing at flat rate council tax as a main offender.
Carter stressed that people should make pension investment choices to see ‘their income rise over time.' He added as people are living longer, retirees would need to plan for ‘tax, inflation and their state of health' and urged that ‘product providers would need to innovate' in response to this ‘new generation' of challenges.
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