Pensioners hit by dual raid on their savings

PENSIONERS face a double blow to the real value of their savings, as the taxman and the banks both take a bigger bite of their returns.

- By Harvey Jones

Over-65s will hand HMRC £2.5billion in savings tax in 2025/26, a staggering 215% increase on just three years ago, new figures show. They pay 41% of all tax charged on savings interest, up from 39% in 2022/23, according to analysis by Paragon Bank.

The culprit is the freeze on income tax thresholds, which is dragging millions into higher bands and pushing more savers over the personal savings allowance (PSA).

The PSA lets basic-rate taxpayers earn £1,000 of interest tax-free, dropping to £500 for higher-rate payers. Additional-rate taxpayers get nothing.

Paragon’s head of savings Andrew Wright said savers face a “significant and rapid escalation in the tax burden”, particularly those nearing or in retirement.