04-04-19 POSTED IN: Pensions, Savings & Investments

Oblivious Workers Over 65 ‘Being Taxed On Their State Pension’

Around 1.1 million over-65s were in employment in 2017, with roughly 950,000 of those receiving a wage alongside drawing their state pension.

The mutual insurer claimed up to 520,000 of these were earning enough money to take them into the higher-rate income tax threshold, resulting in their entire state pension being taxed.

Over-65s who opt to continue working past their state pension age have the option to defer access to their state pension until they officially retire.

Royal London cites that those who defer their state pension can receive an extra 5.8% a year on their pension for each year they defer.

However, those who are claiming their state pension while continuing to work do have the option to ‘unretire’ by asking the Department for Work and Pensions to stop paying it.

Steve Webb, director of policy at Royal London said:

“There has been a huge increase in the number of people working past the age of 65, and most of these people are claiming their state pension as soon as it is available.

“For around half a million workers, this means every penny of their state pension is being taxed, in some cases at the higher rate.

“If their earnings are enough to support them, it makes sense to consider deferring taking a state pension so that less of their pension disappears in tax.”

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