Households with at least one person of state pension age are contributing £8.6bn in income tax each year, in the latest sign that people are working later in life.
According to new analysis from pension house Aegon, pensioner households have seen a substantial increase in their earnings over the past few decades, and this has led to an increase in the amount of income tax being paid by people over the age of 65.
There are 8.7m pensioner households in the UK, compromising approximately 12.8m people. Aegon has found that the proportion of pensioner households paying income tax has increased from 12 per cent in 1997/98 to 17 per cent today, meaning that almost one fifth of all pensioners are paying tax even after they have reached the state pension age.
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“Gone are the days when reaching state pension age meant a total end to work,” said Steven Cameron, pensions director at Aegon. “Many people are choosing to keep working and earning, perhaps by cutting back gradually on the amount of work they do, even once they’ve started taking their pension. These people are contributing significant amounts to the nation’s finances through the tax they generate while also helping the broader economy through their work.”
Aegon has also discovered that the growth in the number of pensioner households working has been accompanied by a rise in their average earnings. Even after taking account of inflation, pensioner couples have seen their weekly earnings increase by 30 per cent over the past 20 years, rising from £410 in 1997/98 to £534 in 2018. Meanwhile, single pensioners have seen a 71 per cent increase in their earnings over the same period, from £199 to £340 per week.
“We’re living in what has been described as a golden era for pensioners, with many benefiting from generous final salary pensions and increases to the state pension,” added Cameron. “When you combine this with earnings from post retirement work, it’s not surprising that many pensioners are living on very decent incomes. However, both final salary pensions and inflation busting increases to the state pension are unlikely to continue indefinitely so it’s important that society is changing with more people able to choose to work past traditional retirement ages.”
Also published on Medium.Last updated: July 3rd, 2018