Some already pay tax on state pension, reports suggests

Nearly 12 million people receive the state pension and the standard rate is below the current £12,570 tax-free threshold.

However, the research by LCP suggests that 2.5 million people already receive more under the state pension system which means they are, and would continue to be, taxed.

The old state pension system – for those who reached pension age before 2016 – is complex, with some people also receiving additional state pension money.

The subsequent new state pension system is designed around a standard rate.

But even under this system, some pensioners may receive more than the standard amount, due to transitional measures ensuring that people who had built up pensions under the old rules could retain their entitlements. About 300,000 people would receive enough to take them into the income tax bracket, the report said.

LCP partner Sir Steve Webb, who is a former Liberal Democrat pensions minister, said: “The reality is that the amounts which pensioners receive vary hugely, from a few pounds a week to hundreds of pounds a week.

“We estimate that around 2.5 million pensioners, or more than one in five of all pensioners, have state pensions in excess of the income tax threshold. These pensioners would overwhelmingly continue to be taxpayers even if future policy linked the income tax allowance to increases in the headline rate of state pension.”

A Conservative Party spokesman said: “Under the triple lock plus, the tax-free allowance for pensioners will rise in line with the fastest of prices, earnings or 2.5% – just like the state pension.”

He said that under Labour, millions of pensioners would pay more tax.

Labour has said the Conservative plan is not credible.