Osborne's raid on UK pensioners
And the biggest changes for pensioners - including future pensioners - was also spelt out by the Chancellor today.
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George Osborne signalled that millions of Britons will have to work longer before they retire. "I can confirm today that there will be an automatic review of the state pension age to ensure it keeps pace with increases in longevity."
What other pension changes did he promise? The freezing of the age-related allowance - £10,500 for those 65 to 74 and £10,660 for those 75 plus - makes sense in the context of the rapid increase of the personal allowance Tom McPhail of Hargreaves Lansdown says. (For some.)
"The age related allowance," he says, "is means tested and as a consequence it is somewhat inefficient. It is a shame therefore that this policy is being introduced in such a way as to penalise some pensioners, with a resulting gain to the exchequer of £3.3 billion over the next 5 years."
£1.25bn 'saved'Osborne's decision to freeze age-related personal tax allowances will likely see around 5m pensioners - those not taxed on the first £10,500 of their annual - see few additional tax reductions in future. But those on the top rate of tax will likely see their bills slimmed. It's estimated this will save the Treasury £670 million in 2014 and £1.25 billion by 2016.
"Older taxpayers will be disappointed," said Age UK, "that the Government has decided to scrap the age-related tax allowance. This will affect those with modest pensions and savings for their retirement. Someone with an income as low as £10,500 who reaches 65 from April 2013 could be £259 a year worse off than under the current system with very little time to adjust their financial retirement plans."
Tax breaks leftPensions tax breaks have been left alone - a surprise, given the current generosity of the system, especially for higher earners. But McPhail says the government has confirmed it's clamping down on the practice of employers making pension contributions for the benefit of spouses of employees in order to circumvent the Annual Allowance.
"We welcome this tightening of the rules," he said. In total it's thought that the average pensioner will be down by around £80 a year while approximately 360,000 individuals aged 65 will lose almost £300 a year.
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