\n New analysis by pension consultants LCP has found that only around 5.4% of Britain\u2019s pensioners – roughly one in 18 – are likely to benefit from the scheme due to begin in 2027\/28.\n<\/p>\n
\n Perhaps most strikingly, no pensioner who reached state pension age before April 6, 2016 – those born before April 6 2016 – is expected to qualify, despite many having identical retirement incomes to those who will receive the tax break.\n<\/p>\n
\n The findings raise fresh questions over the Government\u2019s attempt to solve what experts say is an increasingly awkward political problem: the state pension rising above the frozen personal tax allowance.\n<\/p>\n
Why pensioners could start paying tax on the state pension<\/p>\n
\n Under the \u201ctriple lock\u201d, the state pension rises each year by whichever is highest of inflation, average earnings growth or 2.5%.\n<\/p>\n
\n At the same time, the personal allowance – currently \u00a312,570 – remains frozen until 2030.\n<\/p>\n
\n As a result, analysts expect the full new state pension to exceed the tax-free allowance from April 2027, meaning pensioners who rely solely on the state pension would begin receiving tax demands from HMRC.\n<\/p>\n
\n LCP estimates those tax bills could rise rapidly:\n<\/p>\n
Around \u00a388 in 2027\/28<\/p>\n
Around \u00a3153 in 2028\/29<\/p>\n
Around \u00a3220 in 2029\/30<\/p>\n
\n In last year\u2019s Budget, the Government pledged to prevent these pensioners from paying tax through a special exemption.\n<\/p>\n
\n But pensions experts say the proposal is far narrower than many retirees may realise.\n<\/p>\n
Experts warn the \u201cvast majority\u201d will receive nothing<\/p>\n
\n According to LCP\u2019s deep-dive analysis of official pension data, the overwhelming majority of retirees will not qualify.\n<\/p>\n
\n The consultancy estimates:\n<\/p>\n
Britain currently has around 13.2 million state pension recipients<\/p>\n
Around 7.7 million pensioners on the old state pension system will automatically miss out<\/p>\n
Of the roughly 5 million on the new state pension, most will also fail to qualify because they have additional income, protected payments or overseas residency<\/p>\n
\n That leaves only around 700,000 pensioners potentially benefiting from the tax concession.\n<\/p>\n
\n Former pensions minister and LCP partner Steve Webb said the policy creates major inequalities between pensioners on different systems.\n<\/p>\n
\n \u201cTwo separate policies – triple lock uprating of the state pension and freezing of tax thresholds – will collide next year,\u201d Webb said.\n<\/p>\n
\n \u201cFrom 2027 onwards, someone with just the new state pension and no other income will start getting annual tax bills from HMRC.\u201d\n<\/p>\n
\n He added: \u201cThe proposed solution is deeply flawed. It discriminates against those on the old state pension system, even if they have identical income to someone on the new system.\u201d\n<\/p>\n
Why nobody who retired before April 2016 will benefit<\/p>\n
\n One of the biggest revelations in the report is that pensioners under the pre-2016 state pension system appear effectively excluded.\n<\/p>\n
\n Under the Government\u2019s proposal, the exemption only applies to pensioners whose sole income is the \u201cbasic state pension\u201d with no additions or increments.\n<\/p>\n
\n But the old basic state pension remains far below the tax threshold – currently around \u00a39,614 a year – making it highly unlikely these pensioners would owe income tax anyway.\n<\/p>\n
\n In reality, many retirees under the old system receive extra state pension income through SERPS or the State Second Pension.\n<\/p>\n
\n However, that additional income automatically disqualifies them from the exemption.\n<\/p>\n
\n Experts say this creates highly unusual situations where two pensioners with identical total retirement incomes are treated differently solely because their pension is structured differently.\n<\/p>\n
\n For example:\n<\/p>\n
A pensioner receiving only the full new state pension could qualify for the tax write-off<\/p>\n
A pensioner receiving the same amount via the old basic pension plus SERPS would still face a tax bill<\/p>\n
\n Webb said this amounted to \u201cdifferential treatment\u201d with no obvious justification.\n<\/p>\n
\n Everyone eligible for the basic State Pension has now reached State Pension age<\/a>. To get it you need to have enough National Insurance qualifying years.\n<\/p>\n \n You also need to be either a:\n<\/p>\n man born before 6 April 1951<\/p>\n woman born before 6 April 1953<\/p>\n