A third of people are indebted as they enter retirement
Retirement. That much-awaited time when, after paying off your mortgage and accumulating a pension pot, you stop work and sail off into the sunset to enjoy your twilight years.
Unfortunately, not every retiree’s story matches this ideal. Indeed, far from having everything paid off, it has been reported that nearly a third of those retiring this year will do so in debt*. While the number of people approaching retirement in debt has remained steady 32% this year vs 33% last year, the value of those debts is around a fifth higher than last year’s average, with 2021 retirees owing £20,650 on average.
This debt comes from various sources: Credit card debt – 40%, mortgage debt – 31%, overdraft – 17%, borrowing from family and friends – 8%.
IHT receipts soar in 2021
HMRC data** has revealed that the government collected £5.4bn in Inheritance Tax (IHT) receipts in the 2020-21 tax year – £0.2bn (almost 4%) up on the previous tax year. Typically, more than 20,000 deaths per year result in an IHT charge. There are steps that can be taken to keep an estate out of range of IHT or at least reduce any IHT due upon death.
Triple lock changes for 2022–23
After much speculation, in September, the 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.
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The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.
It is important to take professional advice before making any decision relating to your personal finances. Information within this blog is based on our current understanding of taxation and can be subject to change in future.
It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.
The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.
If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Taxation depends on individual circumstances as well as tax law and HMRC practice which can change.
The information contained within the blog is for information purposes only and does not constitute financial advice.
The purpose of the blog is to provide technical and general guidance and should not be interpreted as a personal recommendation or advice.
*Key, 2021
**HMRC, 2021