Campaigners call for changes to ‘ludicrous’ tax rules set to hit pensioners in 2027
Waspi women have called on Chancellor Rachel Reeves to fix “bizarre” tax rules that could soon see them handing some of their state pension back to HMRC.
Millions of retirees facing the prospect of paying income tax on their state pension in just two years’ time, official forecasts have revealed.
The state pension is set to rise beyond the frozen personal allowance of £12,570 for the first time in 2027 – dragging pensioners into tax liabilities for the first time.
Campaigners with the Women Against State Pension Inequality (Waspi) group are angry that they had to wait five or six years longer than expected to get their state pension – only to face a tax bill on it.
The campaign has been pushing for compensation for the 3.6 million 1950s-born women over failures to properly notify women the age would rising from 60 to 65 or 66.
Some Waspi women on low incomes, forced to turn to food banks to get by, are worried that being dragged into tax will push them into hardship.
Maria Fuccio, 68-year-old from Gosport in Hampshire, said it would be “very frustrating” to be pushed over the tax-free personal allowance.
“It’s not so rosy to get finally the pension and face pay tax on it,” she said. “It could make life more difficult for a lot of Waspi women. It doesn’t seem right. Raising the personal allowance would take the heat off us.”
Fuccio, a former social worker who stopped working due to ill-health, was 59 when she found out that the state pension age for women was being raised from 60 to 66.
“Life has been much more difficult than I thought it would be, even after getting my state pension. It hasn’t been enough to cope with all the bills that have gone up,” said the pensioner.
“I’m not too proud to say I’ve used food banks at times,” Fuccio added.
“It’s abominable what women of our generation have suffered. Labour got a lot of votes by sounding sympathetic to Waspi women. But they ignored us when in power, then told us that most of us knew the pension age was going up.”
The state pension is set to rise by 4.6 per cent in April 2026 under the “triple lock” promise to keep payments rising in line with living costs, according to the latest Office for Budget Responsibility (OBR) forecast.
It would put state pension payments just 15p below the personal allowance threshold of £12,570.
In 2027, the state pension will go £315.50 above the income tax threshold. For a basic rate taxpayer, it means paying 20 per cent in tax, which equates to £63 a year.
Susan Bolland, 69, who campaigns with the Cunninghame Waspi group in Ayrshire, said she already pays “a few hundred pounds” a year in tax on her combined state and small occupational pension.
“It’s so mean. I don’t see how it’s right to give with one hand and take away with the other,” she said on being pushed over the personal allowance.
“People on the lowest incomes face the prospect of being taxed on their state pension, having waited so long to get their pension. It’s ludicrous.”
Bolland added: “When bills and food are going up, having removed the winter fuel payment, there are a lot of Waspi women who are struggling. So many in our group face such a tight squeeze.”
Jon Green, head of retirement policy at the Quilter wealth management firm, said pensioners were “fast approaching a bizarre tax cliff edge for pensioners”, – adding that it would seem “perverse” to many people to have to pay tax on a state pension.
The Government has said personal allowances will remain frozen until 2028. But Reeves is facing growing calls to raise the threshold and protect pensioners from so-called “fiscal drag”.
Dennis Reed, Silver Voices, joined Waspi campaigners in calling for Reeves to raise the personal allowance in line with rising pensions.
He said: “In 2027, those on the state pension will find themselves in a tax trap. It’s ridiculous. It is a ludicrous situation when the safety net is being taxed.”
“We want that personal allowance to be raised – we’ve suggested £1,000,” he added. “But it should be updated on an annual basis by the same increase as the triple lock to prevent the state pension coming within the tax system.”
The Waspi campaign launched legal action against the Government earlier in March after Labour ministers rejected compensation, arguing it would not be a “fair or proportionate” use of taxpayers’ money.
A Parliamentary ombudsman had found the Department for Work and Pensions (DWP) guilty of “maladministration” for failing to properly notify women of the changes.
A Treasury spokesperson said: “We are committed to help our pensioners live their lives with dignity and respect, which is why we have frozen fuel duty and increased the state pension to leave pensioner couples up to £88 better off a month.
They added: “Our commitment to the triple lock means millions will see their pension rise by up to £1,900 this parliament.”
