Martin Lewis warns people 'who were born in the 1960s or 1970s'

Martin Lewis has issued a warning to people born in the late 1960s or 1970s. The BBC Sounds podcast host has spoken out on his latest spin-off episode, where he discussed a tax trap people were falling into while withdrawing cash.

The ITV star and Money Saving Expert founder said on Twitter/X: “If you know anyone thinking of taking money out of their pension (or nearing age 55). This is a must listen as get it wrong and it can cost you £10,000s. Do spread word.”

Martin told his listeners: “Don’t underestimate your longevity. Someone aged 65, on average a man will live another 20 years, a woman another 22 years. But you have a 10 per cent chance as a man of living to 96, and a 10 per cent chance as a woman of living to 98 and it’s worth factoring that in.

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“Admittedly your health, whether you smoke and your current age all factor in.” Martin continued: “You generally get 25 per cent of the money in your pension tax free, and the rest is taxed. But what counts and when it’s taxed is when it gets complicated.”

He added: “Most of the roll is sponge and you have your luxury jam bit in the middle. Well the sponge is the taxable part of your pension and the jam running through the middle, that’s your tax free amount. Now if you take your money out of your pension using it like a bank account, you get a slice of the swiss roll.

"And that swiss roll contains whatever amount you’ve taken from your pension, 25 per cent of it is tax free, and 75 per cent of it is taxed at your marginal rate, whatever income tax rate you’re paying.” Martin continued: “But if you do what’s called a draw-down or annuity then you can just take the jam, you can take 25 per cent of your pension totally tax free and you’re paid the rest via the draw down or annuity later when you take it.”