Increasing longevity means that pensioners can now expect to live up to 19 years on average past a retirement age of 65.
However, this is not without its costs, as new analysis from MetLife has found that every year in retirement can add an extra £5,864 in direct and indirect taxes based on current tax rates to the costs for the average pensioner household. This means the average UK pensioner household could be facing a £111,400 tax bill in retirement.
Dominic Grinstead, Managing Director, MetLife UK, said: âSavers need to focus on tax as part of their retirement income planning and they need to ensure they factor in longevity as a major part of the calculations.
âTax is clearly a major factor and careful financial planning in the critical decade leading up to retirement is crucial to ensure people are prepared.â
MetLifeâs analysis shows direct taxes, including income tax and council tax, account for around two-fifths of a retired householdâs tax bill with indirect taxes, including VAT, duty on tobacco, alcohol and petrol, vehicle excise duty and TV licences, accounting for the rest.
However, less well-off households proportionally pay out the most in direct and indirect tax with 42% of their gross household income being paid out in tax. The bottom tenth of pensioner households, in receipt of gross income estimated at £8,259 a year, pay £3,599 in taxes.
The top 10% of pensioner households, with gross income of £47,992, see 29% of their income going in direct and indirect tax.
