up to date Scottish Widow’s Retirement Report Twenty-three percent of people in their 50s have lost their jobs during the pandemic, revealing that they are in the most hit age group. As a result, many in their 50s and older are worried about their shortage of pension income. Fund their retirement..
Which group is in poverty?
The pandemic has hit many people’s finances. However, the 50-59 year old group has been hit hardest. According to a Scottish Widow’s report, 37% of people aged 50-59 say their financial condition has deteriorated due to a pandemic.
In contrast, those who have already reached retirement age do not seem to be significantly affected. For example, groups over the age of 75 are least likely to suffer from their financial dents (15%). This is followed by 70-75 years (17%), 65-69 years and 60-64 years (24% and 28%, respectively).
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Why do 50-59 years get worse?
The high unemployment rate for people aged 50-59 is due to the nature of their work. Of this group, 17% may be self-employed, compared to 12% between the ages of 25 and 49. Similarly, 24% of this group work part-time, while 20% of the 25-49 year old group work part-time.
Importantly, both of these types of employment are much worse than in the full-time sector.
Another reason 50-59 years get worse is that they simply don’t benefit from lower living costs. Only 16% of this age group sees reduced daily expenses compared to 25% in their twenties.
How does this affect pensions?
Scottish Widow’s found that people over the age of 55 had access to the pension pot and used their savings to cover their daily expenses. In the first three months of 2021, more than 380,000 people withdrew money from retirement funds. This is a 10% increase compared to the same period last year.
13% believe they can’t give up their jobs because the pension pot has been looted.
But the pandemic did more than just dent the pension fund. Scottish Widow’s warns that anyone who has access to retirement savings may face unexpected tax claims.
Currently, you can pension up to £ 40,000 each year and be exempt from this amount (20% or 40% depending on whether you are a basic or higher taxpayer).
However, early access to these funds and continued addition to the pension at a later date will reduce the amount of tax exemption that can be claimed to just £ 4,000 per year. In other words, anything over £ 4,000 is taxed. This rule is based on the terms of the Money Purchase Annual Allowance (MPAA).
This is an example of what happens if you continue to add to the pot after removing your pension savings.
- Save £ 5,000 and get tax exemption for only the first £ 4,000
- After that you have to pay tax (£ 1,000)
- Taxpayers at the base tax rate pay £ 200 (20% of £ 1,000)
- Taxpayers with higher tax rates pay £ 400 (40% of £ 1,000)
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What is happening about poverty in pensions?
Scottish Widows called on the government to intervene. This is not only to address the MPAA rules that reduce tax exemptions, but also to help support cracked self-employed people.
Peter Grancy, Scottish Widow’s Head of Policy, said: And urgent government action is needed to ensure that the entire generation is not accused of working until they fall.
“We are calling for a temporary suspension of MPAA rules to help older workers get their savings back on track during these extraordinary times without being punished.”
Unfortunately, Independent age Charities have found that more than 2 million pensioners are already living in poverty. Of that number, 1.1 million were experiencing severe poverty. So while pension poverty is highlighted, it seems that no action has been taken yet.
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How Covid Pushes Over 50s into Pension Poverty
Source link How Covid Pushes Over 50s into Pension Poverty