Pension warning as thousands to lose £1,260 a year after Rachel Reeves shake up

On Monday, Reeves said only those over the state pension age and receiving benefits will now be eligible for winter fuel payments worth £300 a year.

This rule change will mean that around 90 per cent of pensioners will now miss out on energy support.

According to analyst Cornwall Insight, gas and electricity bills are forecast to rise by another 10 per cent in October.

At a time when energy bills are high, thousands will be under further financial pressure during the winter as a result of the lack of support available.

It comes as millions of pensioners are on track to be hit with a £960 a year “retirement tax” under Labour as a result of frozen tax thresholds, according to broker Hargreaves Lansdown and the Resolution Foundation.

Sarah Coles at Hargreaves Lansdown said: “Pensioners were dealt a painful blow in the Chancellor’s first announcement, which extinguished winter fuel payments for anyone who doesn’t receive pension credit.

“But while the loss of £300 will be felt keenly, it’s a drop in the ocean compared to the impact of frozen tax thresholds.

“This means over 8.5 million pensioners now pay tax, and they’ll be £960 worse off as a result of the freeze.

“As a result, one effective way to cancel out the impact of the benefit cut is to make sure as much of your retirement income is tax-free as possible.”

Some 140,000 pensioners are set to receive a tax demand in the next six weeks for the first time since they retired.

HMRC are issuing these tax demands under the ‘simple assessment’ process.

The number of Britons paying tax on their state pension rose from 7.85 million to 8.51 million, according to recent figures published by HM Revenue and Customs (HMRC).

Many have cited Chancellor Jeremy Hunt's decision to freeze tax allowances until 2028 as the reason behind this due to the impact of “fiscal drag”.

The figures published last week by HMRC in its annual update of the number of pensioners paying income tax reported a 660,000 increase from 2023-24 when the figure sat at 7.85 million.

Since 2020-21, the number of pensioners paying tax has also increased by more than 2 million, from 6.47 million to 8.51 million.

There are now also 8.9 million taxpayers aged 65 and over, compared with 4.9 million in 2010-2011.

Steve Webb, partner at LCP, said: “These new figures from HMRC are very timely and help to inform the debate about pensioners and tax.

“They show that a combination of frozen tax thresholds and significant increases in the state pension means the number of pensioners paying tax has continued to soar.

“But this is a continuation of a long-term trend which has seen the number of over 65s paying tax rise by around 4 million since 2010-11. For a pensioner in Britain, being an income taxpayer is now the norm rather than the exception.”