Money – In the news

A third enter retirement in debt

Retirement. You’ve paid off your mortgage, said goodbye to your colleagues for the last time and now it’s finally time to put your feet up and enjoy some well-deserved rest, free of commitments. That’s the ideal, anyway. Unfortunately, many retirees enter this stage of their lives with significant commitments hanging over their head, with research1 finding that a third of people now retire in debt. Worse still, 2021 retirees owe around a fifth more than last year’s cohort – around £20,650 on average. Forty percent have credit card debt, 31% still have outstanding mortgage payments, 17% are in their overdraft, while 8% have borrowed from family and friends.

IHT bills up year-on-year

Data2 published by HMRC has revealed that estates paid £5.4bn in Inheritance Tax (IHT) in the 2020-21 tax year – £0.2bn (nearly 4%) up on 2019-20. Each year, over 20,000 estates are liable for IHT, but there are ways to keep your estate under the nil-rate threshold or at least minimise your liability.

Triple lock changes for 2022-23

After much speculation, in September, Secretary of State for Work and Pensions, confirmed suspension of the average earnings component of the pension triple lock, to avoid a disproportionate rise of the State Pension following the pandemic. For the 2022-23 tax year only, the new and basic State Pension will increase by the higher of either 2.5% or the consumer rate of inflation.

National Insurance and dividend tax rises

A new health and social care tax will be introduced across the UK from April 2022. The tax will initially begin as a 1.25 percentage point increase in National Insurance, paid by both workers and employers. From April 2023, it will become a separate tax on earned income, calculated in the same way as National Insurance and ring-fenced as a health and social care levy. Tax on share dividends is also scheduled to increase by 1.25 percentage points.

1Key, 2021

2HMRC, 2021

The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation. Inheritance Tax Planning is not regulated by the Financial Conduct Authority.