Rachel Reeves deals another blow to pensioners with £2.7k in extra bills | Personal Finance | Finance

Pensioners must now pay £2,700 more in tax to maintain their lifestyles than four years ago. In 2020-21, a pensioner would have paid £5,058 in income tax to live a “comfortable” retirement, whereas this rose to £7,787 in 2023-24, as per The Telegraph. This is due to higher living costs and frozen tax thresholds that have sent tax bills rising by £2,729, the equivalent of 54%.

The Pensions and Lifetime Savings Association (PLSA) defines a “comfortable” retirement as spending £70 on groceries and £60 on meals out each week, while still having enough for activities such as theatre trips, holidays, and regular beauty treatments. The cost of maintaining this lifestyle shot up from £32,800 a year in 2020-21 to £43,100 in 2023-34 as the cost of energy, groceries, holidays, and driving have all increased, as per the PLSA.

Compounding this, income tax thresholds have been frozen since 2020-21 until 2027-28, but Rachel Reeves has not ruled out extending this period.

This has forced pensioners into higher brackets as incomes rise in a failed effort to keep up with inflation.

Jon Greer, head of retirement policy at Quilter, told The Telegraph: “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.”