MAPPED: Where homeowning pensioners will be hardest hit if Reeves carries out Australia-style pension plan

The Chancellor has floated several plans to minimise state expenditure on pensions including pooling pension pots into ‘mega-funds’ worth hundreds of billions.

With control of enormous financial resources, pensions managers would then be encouraged to invest in things which give a better rate of return, thus increasing the amount pensioners receive and saving the Treasury money.

Investments would inherently be riskier, prompting industry chiefs to warn the shakeup could leave savers worse off.

Reeves may ignore this and plough ahead though as the pooling of pension pots and subsequent larger investments could turbocharge Britain’s growth, something she is desperately seeking to keep her budget afloat.

Another reform she is considering is means testing the state pension in the belief many pensioners receive state support when they don’t need it.

Australia and Canada operate systems of means tested pensions, which the Chancellor has openly referred to.

Looking at the details of Australia’s means testing, we can begin to see what might be in store for British pensioners and soon-to-be pensioners.

In Australia, the value of your state pension depends on whether you own a house and what its value is. This is called the assets test.

If your house exceeds a certain value, your state pension will reduce. The limits are as follows (thresholds have been converted to GBP using today’s exchange rate).

Applying these limits to British pensioners, we learn that if you are a single pensioner who owns a home worth over £160,000, your pension will reduce.

If you are married or in a relationship, that number rises to £240,000 before both of your pensions reduce.

This will ring alarm bells for many homeowning pensioners in Britain because the average value of a house in the UK is £293,000, well over both limits in Australia where house prices are higher than Britain.

With this figure in mind, we can begin to work out how many pensioners in Britain would be affected by the Australian style means testing.

According to the ONS, around 74 per cent of pensioners own their own home in Britain (22 per cent rent, and the remaining four per cent have other arrangements).

DWP reported 12.6 million people received the State Pension in 2023, meaning there are roughly 9.3million homeowning pensioners in Britain (74 per cent of 12.6million).

With an average house value of £293,000, we can assume 50 to 70 per cent of houses are above the £240,000 cap, which means between 4.65 and 6.51million pensioners will have their state pension reduced if an Australian style means testing is adopted.

But with house prices varying hugely across the country, pensioners’ state pensions would in many cases become linked to where they lived, sparking concerns of a postcode lottery.

For example, homes in the East of England cost an average of £344,000, rising to £385,000 in the South East and a whopping £531,000 in London.

Pensioners who may not necessarily be wealthy but do live in valuable flats and houses by nature of their postcode and Britain’s housing crisis could therefore see their pension reduced significantly.

The following map reveals roughly how many pensioners would be affected by an assets test in each of England's regions.

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EXPLORE - areas that would be most affected by an Australian style means testing of the state pension

Estimated number of pensioners that would be affected by means testing the state pension on house value, broken down by region

With a high average house price of £385,000 and the largest number of pensioners in Britain (1.7million), the South East would be the most affected area.

A whopping one million pensioners would see their state pension reduced here if the means testing was adopted, the estimates show.

On the other hand, in the North East where house prices average £166,000 and there are only 540,000 pensioners, an estimated 119,000 pensioners would see their state pension reduce.

It is worth noting these figures are estimates and show an indication of how many pensioners could be affected should the Australian model be adopted.

A government spokesperson said: "Our commitment to the Triple Lock is unwavering because we want pensioners to enjoy the dignity and respect they deserve in retirement.

"This means millions will see their State Pension rise by up to £1,900 over this parliament.”