Half a million workers past pension age could be paying unnecessary tax
A significant number of people working past the State Pension age could be paying unnecessary tax on their State Pension, according to new research. This is because they failed to take up the option of deferring their State Pension until they stopped work. As a result, their entire State Pension is being taxed, in some cases at 40%.
The scale of the UK’s lost pensions mountain has been exposed by the largest study yet on the subject. The Pensions Policy Institute surveyed firms representing about 50% of the private defined contribution pensions market.
The introduction of pension freedoms has been a huge enabler for over-55s, allowing millions to draw income from their pensions flexibly. Pension freedoms offer the opportunity to transition into retirement by continuing to work with reduced hours beyond traditional retirement age.
On 6 April 2019, the minimum level of auto-enrolment contributions increased to 8% of earnings, made up of 3% from employers and 5% from employees. According to data from the Pensions Regulator, auto-enrolment has brought a total of 9,937,000 people into the scheme to date, and involved 1,400,918 employers.