'Watch out pensioners - an attack on pension savings could be looming,' says John Redwood

Out goes their winter fuel allowance unless they are on Pension Credit. A large number of pensioners on low incomes just above the benefit line now face a difficult winter.

The government is continuing with the price controls and has just hiked the energy price by 10 per cent or £149 for an average household.

Pensioners losing benefits will need to find another £349 to £449 to meet the bills and replace the lost support. Pensioners tend to stay at home more and need more heating over the winter, presenting them with high bills.

The workforce often has an employer paying to keep them warm at work.

Why did they do it? They say it is to fill a black hole in the public finances. Others point out that they have just given well-paid train drivers a large inflation-busting rise.

That will mean more public subsidies for our largely nationalised rail industry, so let the pensioners pay. They are seeking to settle a number of public sector pay disputes by offering bigger increases without any productivity strings attached.

Worse still instead of creating the strike-free harmony they want, it often leads other groups to demand catch-up or comparability increases, swelling the costs more. So watch out pensioners, there could be more bad news to come.

Some think there could be increases in inheritance tax. The government could make the rules tougher over passing on pension assets that survive a pensioner.

Currently, if you have a personal pension fund which is paying the pension, what remains can normally be gifted free of tax on death. It is unlikely this government will raise the thresholds for inheritance tax, so they will allow inflation to push more people into the net to pay the tax on death.

Many object to inheritance tax, claiming it is a second round of taxation on savings out of taxed income. Others welcome an inheritance tax as a means of reducing the windfall grant of money to some who have wealthier parents.

The government will tend to the view that more taxation of inheritances is a good thing.

It is widely discussed that Labour will want to make it more difficult to save for retirement, and will place limits on how much tax relief you can enjoy in order to provide for your old age.

They seem to favour an expansion of numbers on Pension Credit, topping up the basic state retirement pension rather than trying to get as many people free of benefits as possible by helping them save more for their old age.

Indeed, one of the ironies of Ministers dealing with criticisms from their own side as well as from the Opposition over the withdrawal of the fuel allowance is they say there should be many more on Pension Credit.

If they succeed with this campaign, the savings from the winter fuel change will be increasingly absorbed in paying for more pension means-tested benefits, leaving the pay black hole unfilled.

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The attack on pension savings could take various forms. They could decide to end the tax-free lump sum people can withdraw where they have sufficient savings when they retire.

People can take out up to 25 per cent from their pension savings, which would enable them to move house or set themselves up for their new retirement needs. They could return to the idea of lower limits on how much a person can save each year with tax relief on the contributions.

They could limit the tax relief to the standard rate of tax, making it dearer for those on higher incomes to save. They could place a new lifetime limit on how much tax-free pension saving you are allowed.

All of these changes would lead to less pension saving taking place, which means future pensioners having a tougher time in old age and more of them needing to rely on state benefits.

The tax arguments are about how people see personal incomes and savings. Some take the view that we should live in a pocket-money society, where the government takes ever larger sums from people who are successful to give to others to create more equality. The government ends up deciding what many people's net income and living standard will be.

Others argue that high taxes drive successful people out of the country or lead them to risk and venture less. They think people should keep more of what they earn from hard work and business success. The first group want fairer shares of a pie which will not grow so fast.

The second group think all will benefit more if you allow the successful to grow the pie faster. Rich pensioners can always leave the country for a lower-tax place to live, and successful business people and investors can take their money elsewhere.

Who will pay the higher train driver wages then? And who will pay for all the extra pensioners on Pension Credit, trying to keep warm?