Laura Kuenssberg grills Rishi Sunak on taxation rise
The Great British Retirement Survey of 10,000 Britons, carried out by Interactive Investor, has found that trust in the Government to fulfil its pension promises is dramatically declining. In fact, one in five of the survey’s working respondents did not trust whether they would receive any state pension by the time they choose to retire.
Young people in particular lack trust in the Government with a staggering 53 percent of people aged 24 to 29 doubting whether they can rely on the government state pension.
The stress of future finances weighs heavily on Britons, as the survey reported that 41 percent of non-retired people and 27 percent of retired people are concerned about the risk of running out of money in retirement.
The current state pension stands at roughly £137.60 per week, which is just 24.8 percent of average earnings in the UK, according to the Pension Policy Institute.
A spokesperson from the Department for Work and Pensions (DWP) said: “We are committed to ensuring that older people are able to live with the dignity and respect they deserve and the state pension is the foundation of support for older people.
“Since 2010, State Pension has increased by over £2,050 in cash terms and we expect to spend more than £125 billion on benefits for pensioners in 2020/21.
But activists say that this is not enough, as today two million elderly people in the UK are living in poverty.
Stephen Lowe, Director at Retirement services company Just, said: “The state pension alone will not provide a comfortable standard of living so checking your entitlement for other State Benefits should be as much a part of planning for retirement as understanding what your private pension and other savings will provide.”
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One of the biggest concerns voiced by participants was what Chancellor Rishi Sunak will do next, after choosing to extend a new 1.25 percent levy – which is to be introduced by a hike in National Insurance – to apply to earning pensioners as well as breaking his state pension triple lock pledge.
Taxation ranked as a top-three financial concern for 30 percent of non-retired respondents and 25 percent of retired respondents.
According to Interactive Investor’s research, people are most concerned about changes to the Lifetime Allowance, which is the total amount you can build up in all your pension savings without incurring a tax charge.
The Lifetime Allowance currently sits at just over £1million, but with a national debt of more than £2trillion, Mr Sunak is assessing ways to bring in more money to the Treasury and taxing pensions after a lower Lifetime Allowance cap could be one of them.
As it stands, you can withdraw 25 percent of your pension pot in one lump-sum tax-free, as long as that sum totals less than £1.07million.
After withdrawing this amount, you will be charged Income Tax on the rest of your pension income withdrawals, and once you have withdrawn more than £1.07million, you will be charged Lifetime Allowance tax on top of Income tax.
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Moira O’Neill, Head of Personal Finance for Interactive Investor, said: “Saving into pensions is an act of faith – it’s something we’re encouraged to do all our working lives.
“So it’s not surprising that people’s faith is undermined and their tolerance stretched when the Chancellor plays Dick Turpin with pensions.
“Many engaged long term investors see the Lifetime Allowance as highway robbery and with the Treasury repeatedly signalling more tax attacks on pensions, they get even angrier.”
Campaigners are calling for a Lifetime Allowance pool for couples, so that if one person is not earning or earning a smaller amount, then their spouse has the option to put just over £2million in their joint pension pot without being charged the Lifetime Allowance tax.
Becky O’Connor, Head of Pensions and Savings at Interactive Investor, said: “This would mirror the joint treatment of Inheritance Tax allowances for residential property.
“We like this idea, and it would acknowledge that for many older couples, a pension for two has been built up in a sole name.”
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READ MORE: Pensioner ‘amazed’ as they get £79,000 state pension lump sum payout
Tax attacks also have the younger generation feeling hopeless about the prospect of a happy financially-secure retirement.
The DWP say that young people can “improve their financial security for the future” by enrolling into a workplace pension scheme.
But with a rising cost of living and extortoinate rent charges, less and less young people are able to begin contributing to a private pension in their twenties.
As house prices have skyrocketed over the last 25 years, saving for a mortgage is most young people’s financial priority.
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This burden is also felt by parents and grandparents of young people who help them get onto the property ladder, and Interactive Investor say that there are “serious concerns about the financial stability of the Bank of Mum and Dad”.
The Great British Retirement Survey found 60 percent of retired respondents with children had helped them purchase a home, usually by gifting or loaning money towards a deposit, and 37 percent of non-retired parents said the same.
Ms O’Neill said: “It’s a measure of how little people trust the Government around pensions that younger respondents are questioning whether they’ll even get a state pension.
“This comes at the same time as they’re finding it harder than ever to start the journey of home ownership.”
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