What the Autumn Statement holds for pensioners

George OsborneStefan Rousseau/PA Wire

Talk surrounding the Autumn Statement has been all about pensions, and whether George Osborne is going to conduct a tax raid. Those who are already drawing their pensions could be seen as the lucky generation: the ones with generous tax relief on pensions, good final salary schemes, and huge increases in property values.

However, Osborne isn't blind to the fact that this group could be ripe for plundering.

Property tax

Retirees' properties are particularly drawing the eye - as many pensioners have built up a great deal of value in their homes over the years, and Osborne may want to get his hands on a slice of it.

The Liberal Democrats have been pushing for a Mansion Tax, and after Osborne ruled it out at the Conservative Party Conference, they have been suggesting alternatives. Options on the table include higher rates of council tax for the most expensive homes and increasing stamp duty when the priciest homes are sold.

A council tax change would have to overcome the serious obstacle that many of those who live in expensive properties are living on modest pensions and could not afford the charge. After the debacle of the Granny Tax, it is likely to be something David Cameron wants to avoid at all costs. Number 10 has categorically ruled it out in this parliament.

Stamp Duty, on the other hand, would have less immediate opposition, and is therefore coming out as the favourite. It is something that Number 10 has refused to deny in recent weeks.

At the very least we are expecting a crackdown on stamp duty avoidance schemes, and new penalties for those who buy their property through a company - which is one way that wealthier buyers have cut their tax bill in the past.

Even without a specific property-related tax, Osborne can indirectly pile on the pressure on the value of properties, by freezing the inheritance tax threshold again. Currently it is stuck at £325,000 - above which value you have to pay 40% on everything you leave behind. The experts think another freeze is a very real possibility.


Saga, meanwhile, is keen to point out that retirees aren't just a bottomless pit of cash for the Chancellor to dip into. The current financial crisis has caused a major financial headache for many. Dr Ros Altmann, Director General of Saga is calling for more help for pensioners with savings.

She says: "It is important that we encourage people to save for their future, but if we continue to punish those who have done so, especially as they reach retirement, younger people will decide it is simply not worth it." Specifically she wants to see are a change to ISA rules to allow more to be put into cash. However, this isn't expected to materialise this time. She is also calling for new personal saving schemes to fund later life care, but again, this would have to be something for the future.


One Saga suggestion which could materialise, is a change to the way that capped drawdown arrangements in pensions work. Income drawdown is the facility to continue to keep your pension savings invested and take an income each year rather than giving all the money to an insurance company to buy an annuity.

In the past three years the Treasury and The Bank of England have introduced policy changes to income drawdown which have slashed the private pension income of many retired people by more than a third. For example, the maximum annual income a 65-year-old man could draw from a £100,000 capped drawdown pension fund has fallen from £7,920 in August 2009, to £5,300 in August this year.

Altmann says: "Saga has been inundated with letters and emails from distraught and angry pensioners who have saved hard and expected their pension savings to support their retirement lifestyle. Now, despite having plenty of money in their fund, the government's rules won't allow them to spend it. There is not even any allowance for those in poorer than average health. Falling gilt yields have meant that each year they have been able to take out less and less from their pension."

HMRC and the industry have been feverishly at work in recent weeks, so a solution is widely expected to be announced. This could be a tinkering to the way the cap is calculated in order to allow them to take more - or a fundamental review of the market.

Tax tricks to improve your wealth
See Gallery
What the Autumn Statement holds for pensioners

If you wear a uniform of any kind to work and have to wash, repair or replace it yourself, you may be able to reclaim tax paid over the last four years. For some people, this could mean a windfall worth hundreds of pounds

The interest you receive on savings accounts (with the exception of cash Isas) is automatically taxed at a rate of 20%.

Higher-rate taxpayers therefore tend to owe money on the interest they are paid throughout the year. If, however, you are on a low income or not earning at all, you should be able to claim all or some of the tax deducted back

You can apply for a refund of vehicle tax if you are the current registered keeper or were the last registered keeper of your vehicle that no longer needs a tax disc

If you pay tax on a company, personal or State Pension through PAYE (the system employers use to deduct tax from your wages), you may well end up overpaying

There is a limit to the amount you need to pay in NI, whether or not you work for an employer.

Instances in which you may find that you have overpaid include if you work two or more jobs and earn more than £817 a week and if you move from self-employment to employment, but continue to pay Class 2 National Insurance contributions


More stories

Read Full Story