Published On: Mon, Feb 20th, 2023

Tip to boost pension as thousands of Britons face income tax hike | Personal Finance | Finance

Many Britons are also set to pay capital gains tax for the first time as the threshold for the tax decreases from £12,300 to £6,000. This will be slashed again next April with the threshold to go down to £3,000.

Financial experts at True Potential have said Britons should consider increasing their as a way to save up for the future and avoid the tax hikes.

Chief executive Daniel Harrison urged Britons to make sure their money is working for them amid the tax changes.

He said those who will see their income tax bill increase in the coming financial year should look at investing in a salary sacrifice arrangement with their employer.

He explained: “This involves asking your employer to increase your pension contribution by lowering your base salary.

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The group those who want to retire at age 60 rather than at the upcoming pension age of 68, need an additional £130,000 in retirement savings.

The state pension age is currently 66 for men and women but is to be gradually increased to 67 and then 68 over the coming years.

Those who want to retire at 63 still need an extra £85,000 to cover their costs before they reach state pension age.

PensionBee calculated a person with a typical £40,000 saved up by the age of 50 faces a shortfall of £153,400 for what they would pay for the whole of their retirement, even with payments from their state pension.

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If this person wanted to retire at 60 they would need £232,000 in savings. This compares with what their realistic retirement savings would be, of around £78,600.

Becky O’Connor, director of Public Affairs at PensionBee, warned: “Retiring before state pension age is pie in the sky for many.

“The ‘pre-state pension gap’ is the total amount of retirement income someone would need to retire earlier than the state pension entitlement age and maintain a moderate lifestyle.

“Our analysis suggests that is way out of reach for a worker on an average salary and with a typical pot size at age 50.”

A Government review is to be published this year into the with many analysts expecting the transition from 67 to 68 to be brought forward.

Current legislation outlines the state pension age will increase to 67 by 2028 with the move to 68 to take place between 2044 and 2046.

Ms O’Connor said: “The ‘ideal’ retirement age, according to our survey was 60, while the healthy life expectancy age is on average 63 in the UK, so we used these two ages in our analysis to give an idea of the value of this particular pension gap for people who might want or need to retire at these ages, rather than waiting until they get the state pension.

“Meanwhile, four in 10 workers think they wouldn’t be able to retire before state pension entitlement age, suggesting that bringing forward the increase to age 68 would not merely be a costly inconvenience for more people, it would effectively force more workers to carry on working until the point they can draw their state pension.”

The full basic state pension currently pays £141.85 a week while the full new state pension is £185.15 a week.

Payments are increasing by 10.1 percent in April, with the full basic state pension increasing to £156.20 a week while the full new state pension is increasing to £203.85 a week.

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