Thousands of elderly Britons relying on the state pension are receiving unexpected demands for hundreds of pounds from the taxman, despite a government pledge to protect them from such charges.
Pensioner's Shock at £800 Bill
Alan Perkins, 71, who depends solely on his Department for Work and Pensions (DWP) state pension, has been billed for £800 by HM Revenue and Customs (HMRC). This demand comes despite Chancellor Rachel Reeves's promise that state pensioners would not pay income tax when the pension rises above the personal allowance in 2027.
Mr Perkins, who worked for five decades before retiring last year, is one of many affected by this issue. He contributed to the State Earnings-Related Pension Scheme (SERPS), a government top-up scheme that ran from 1978 to 2002.
The SERPS Top-Up Trap
These historic SERPS contributions mean Mr Perkins receives an extra £90 per week on top of the standard state pension. This brings his total annual income to approximately £16,500, compared to the normal full new state pension of £11,973.
Critically, his income is now £4,000 above the personal allowance threshold, which has been frozen since 2021. According to the Pensions and Lifetime Savings Association, the income required for a minimum standard of living in retirement is around £13,400, putting Mr Perkins only slightly above that baseline.
Experts Condemn "Indefensible" Policy
Former Liberal Democrat pensions minister, Sir Steve Webb, has sharply criticised the situation. He highlighted a glaring inconsistency in the proposed policy. "It’s perfectly possible to have two pensioners who live next door to each other with identical state pensions – one from the standard rate of the new state pension and one from the old basic pension plus Serps," he explained.
"As far as we can see, the first of these will be let off paying income tax but the second will not. In my view this is completely indefensible," Sir Steve stated.
Baroness Altmann, a former Conservative pensions minister, echoed these concerns, warning the policy is "fraught with risks that will hit people on the wrong side of the cliff-edge, while others will not be affected at all."
The core of the problem lies in the interaction between the frozen tax thresholds, the rising state pension under the Triple Lock, and the additional income from now-defunct schemes like SERPS. This combination is pulling thousands of pensioners over the tax line, resulting in demands they did not anticipate and may struggle to pay.
