Retired households handed over almost £7,000 last year alone, figures show.
Pensioners are handing over nearly a third of their income in tax each year, according to a new report.
Retired households paid an average tax bill of just over £7,000 last year, according to Prudential.
That adds up to nearly 30% of their annual income.
The latest official figures show that retired households paid over £51 billion in tax in the 2014-15 tax year.
That amounts to just over £7,000 per household.
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How it adds up
That figure is made up of more than £2,700 paid in direct taxation such as income tax and council tax.
The bulk of the tax bill, £4,330 on average, is paid through indirect taxes including VAT, vehicle excise duty and other indirect taxes.
“When planning for life after giving up work it is important to remember that unfortunately you’re not retiring from paying tax,” says Stan Russell, a retirement income expert at Prudential.
“As well as indirectly paying tax and duty on the goods and services they buy every day, many retired people will also still need to pay income tax.”
Paying £7,000 a year in tax seriously diminishes retirement incomes, according to Prudential’s research.
[SPOTLIGHT] The average income for a retired household in the 2014-15 tax year was £23,800.
That means pensioners are handing over nearly 30% of their income to the taxman.
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The silver lining
The good news is that the average retired household’s income has gone up by £1,300 from the previous tax year.
The tax bill has also gone up, by approximately £300, but the total amount paid in tax as a percentage of income has fallen.
In 2014-15 retired households lost 29.7% of their income to tax, in 2013-14 that figure was 30.1%.
Planning for retirement
When planning for your retirement you need to take into account the fact that you may still have to pay income tax after you stop working.
Data from the Office of National Statistics shows that working households pays 34.5% of their income to the taxman.
On average that only falls by five percentage points to 29.7% when the head of the household retires.
“For many people considering their finances in retirement, a consultation with a professional financial adviser can help to set a target income level and the necessary regular savings required to achieve it,” says Russell.
“A financial adviser should also help explain the tax implications of the wider range of options now open to those looking to take an income from their pension savings.”
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