Not a full state pension plus a private pension

maman

To me it's a 'no brainer'. Which is better (x-20%) or a big fat zero. 

kermchem

badmemory said:

I doubt very much that the only for state pension tax relief will actually go ahead.  After a few years it will end up with people with a small private pension & a state pension worse off than someone with only a state pension.  Not that I would place any bets on that.

Let's put some real numbers on Rachel Reeve's little plan.

State Pension from April 2026 is £12547.60 for a person on the full new state pension.

The personal allowance for tax year April 2026 to April 2027 is £12570 and this has been frozen until April 2031. 

The state pension will increase by the triple lock of average earnings, CPI or 2.5%, and right now every political party thinks it would be electoral suicide to suggest getting rid of it. This means that the state pesnion from April 2030 (the last current frozen personal allowance tax year) will be at least £13850 (assuming 2.5% increases), and said pensioner will owe at least £256 in income tax.

The cunning plan to avoid pensioners having to pay tax from April 2027 looks like a dead parrot come April 2030.

Sorry, Chancellor, you cannot increase state pensions, freeze allowances and offer state pensioners with no other income the carrot of not having to pay tax. Something has to give.

badmemory

That would leave someone with a small private pension of only £20 a month (& there are some) with annual £240 with tax due of £48 plus £256 = £304.  Leaving them £64 worse off than someone with just a state pension.  Do the OBR have oversight over this.

Albermarle

badmemory said:

That would leave someone with a small private pension of only £20 a month (& there are some) with annual £240 with tax due of £48 plus £256 = £304.  Leaving them £64 worse off than someone with just a state pension.  Do the OBR have oversight over this.

The problem with any tax changes ( not just with pensions) is that there are always a few people left feeling it was particularly unfair to them. It is inevitable.
In any case the OBR look at predicted future Govt inflows and outflows of money, and how it affects the public finances, not at specific tax rules.

badmemory

The real problem of course is not that it will be a few people affected but around 10 million.  Not as seriously as I quoted but still affected.  Of a group that do normally pay their taxes promptly.

Dazed_and_C0nfused

badmemory said:

The real problem of course is not that it will be a few people affected but around 10 million.  Not as seriously as I quoted but still affected.  Of a group that do normally pay their taxes promptly.

It can't possibly be that many people.

I'm sure someone (@hugheskevi?) has posted previously that there are around 12 million people receiving State Pension.

Those getting just the basic State Pension scheme will have a good few years before this becomes relevant to them.

And a proportion of those on new State Pension will have some other taxable income, whether it be another pension, interest or dividends.  Especially with the impacts of auto enrolment becoming ever more relevant.

It won't be insignificant but 10 million seems a stretch.

badmemory

It is however totally illogical that around 10 million people have to pay tax on the only benefit which is currently taxable whilst around 2 million do not, even though tax would normally be due.

Dazed_and_C0nfused

badmemory said:

It is however totally illogical that around 10 million people have to pay tax on the only benefit which is currently taxable whilst around 2 million do not, even though tax would normally be due.

There are a number of other taxable benefits.

But I do agree this policy seems illogical.  These pensioners are in this situation as a result of both the current and previous governments policies.

Yet HMRC have been asked to intervene and stop the policy having it's natural impact.

Is it coincident pensioners apparently vote in large numbers 🤔

hugheskevi

Dazed_and_C0nfused said:

I'm sure someone (@hugheskevi?) has posted previously that there are around 12 million people receiving State Pension.

As at May 2025, there were 13.1m in receipt of a State Pension. 

Of the 13.1m, 8.3m (63%) receive a pre-2016 pension and 4.8m (37%) receive the new State Pension

badmemory

It will probably take several decades before the basic state pension reaches the current personal allowance as it is only 75% of the new state pension & I cannot see them including SERPS in this as there are a few people on over £30k.