Are you paying unnecessary income tax?

Do you know that around half a million older workers may be paying “unnecessary” tax on their state pension, analysis revealed from the Government’s Labour Force Survey and Family Resources Survey.

A large group of older workers at the state pension age, could be paying tax on their state pension when they may not need to because they have failed to or are unaware that they can take up the option of deferring their state pension until they stop work.

Individuals do not have to draw their state pension as soon as they reach the age of eligibility and they can defer it in return for receiving an enhanced payout when they do start to receive it.

Research from Royal London has found that a large number of older workers are failing to defer their state pension and in doing so, are missing out on a potential extra 5.8 per cent annually on their pension for the rest of their lives for each year they defer. Further to this research, they found when comparing an individual who received their state pension immediately while continuing to work against an individual who deferred their state pension by one year, an average male worker could gain around £3,000 by deferring for a year and a female worker, with a longer life expectancy, could be around £4,000 better off after retirement over their lifetime. If you are still working, one option may be to invest the funds to produce further income or capital at a later date. Pension contributions are still possible up to age seventy-five, with tax relief available to offset the tax paid.

Each individual’s circumstances are unique; some may wish to take their state pension on principle, while others may need the income. At Philip J Milton & Company we advise on all aspects of your finances and help you to achieve your financial goals in the short to long term. If you would like to know more about financial advice then please do contact us to make a mutually convenient appointment. We have a team of highly qualified advisers who would be only too happy to discuss your options, with the initial meeting provided at our cost.