Mutual insurer Royal London has published research showing that over half a million people are losing out financially due to paying unnecessary tax on their state pensions. The company found that roughly 950,000 out of the 1.1 million people in the workforce aged 65 or over were combining paid work with drawing a state pension.
For around 520,000 of these people, doing so pushed them over a tax threshold, meaning the entirety of their state pension was taxed. Royal London revealed that by deferring their pensions for just one year, these individuals could save £3,000 to £4,000 over their lifetimes.
Steve Webb, director of policy at Royal London, said: “Those who have worked hard to build up a state pension through their working life do not want to see a big chunk of it disappear in unnecessary taxation. The government should be doing more to alert this group to the option of deferring, as current publicity is clearly not working.”