Play all audios:
Calls to make the State Pension exempt from income tax are gaining momentum, as thousands of retirees back a growing petition demanding urgent reform to what many see as an “unfair” and
outdated system. Pension experts at Spencer Churchill say the government must listen to the rising number of older people now being taxed on their retirement income. More than 4,300 people
have signed a new petition urging the UK Government to stop taxing the State Pension, which campaigners argue should not be counted towards the personal tax allowance. The allowance has been
frozen at £12,570 since the 2021/22 financial year and is set to remain unchanged until at least April 2028, despite rising State Pension payments. David Bresnahan, who launched the
petition, says it is “wrong to tax the State Pension” - a sentiment shared by many retirees who feel penalised after decades of contributing to the system. Pension experts at Spencer
Churchill Claims Advice say the petition highlights a wider issue with how the tax system treats older people. “There’s growing frustration among pensioners who feel that taxing the State
Pension—after a lifetime of National Insurance contributions—is fundamentally unfair,” said a spokesperson from Spencer Churchill. “While many retirees don’t exceed the personal allowance, a
rising number with modest private pensions are being pulled into the tax net. The current petition reflects a wider call for reform.” With the full New State Pension now rising to nearly
£12,000 per year, even small amounts of additional income from workplace or private pensions can push pensioners above the threshold, subjecting them to tax. “The Personal Allowance freeze
until 2028, despite rising State Pension payments, means more pensioners will cross the tax threshold each year,” the spokesperson added. “What we’re seeing is ‘fiscal drag’ in action—where
people end up paying more tax even though their real income hasn’t meaningfully increased.” IMPACT OF MAKING STATE PENSION TAX-FREE While making State Pension income entirely tax-exempt
might be popular with voters, experts caution it may not be fiscally viable without wider structural changes. “While making the State Pension tax-exempt may seem like a simple solution, it
would complicate the tax system and potentially cost the Treasury billions,” the Spencer Churchill expert warned. “A more balanced approach might be to increase the Personal Allowance for
retirees or introduce a pensioner-specific tax band.” Recent data suggests that around 62% of the UK’s 13 million State Pensioners already pay some form of tax in retirement, often without
realising they’ve crossed the threshold. Experts say more education is also needed to help people understand their retirement tax liabilities. “There’s often confusion around when and why
pensioners pay tax,” said the spokesperson. “It’s important to remember that income tax is only applied to earnings above £12,570. For many, it’s not the State Pension itself that triggers
tax, but the combination of state and private pensions.” The petition will receive a government response if it reaches 10,000 signatures. At 100,000 signatures, it could be considered for
debate in Parliament. However, a similar petition calling for the Personal Allowance to rise to £20,000 was recently debated and rejected by MPs. As more pensioners are drawn into the tax
system, campaigners and experts alike are urging the government to re-evaluate whether taxing the State Pension aligns with the principles of fairness and support in later life.