State pension warning as thousands of over-80s hit with four-figure 'retirement tax' bills

An additional 71,000 pensioners now face tax demands of £1,000 or more on their state pension, pushing the total number affected to 320,000, according to analysis of official figures.

Retirees aged 80 and above are bearing the brunt of these charges, with data showing they are five times more likely than younger pensioners to receive four-figure bills from HMRC.

The surge represents a significant jump from 249,000 pensioners in this position during the previous year.

Meanwhile, those facing even steeper demands have grown substantially, with 15,800 retirees paying at least £2,000 in tax on their state pension income alone last financial year – a 48 per cent increase from 10,700 previously.

The phenomenon stems from a combination of frozen tax thresholds and annual state pension increases under the triple lock mechanism, which together are dragging more retirees into the tax system.

Approximately 3.2 million pensioners – roughly one in four – now receive state pensions exceeding the personal allowance, meaning they owe tax on that income.

Older pensioners are particularly affected due to earnings-related supplements to the pre-2016 state pension, known as Serps, which boost their overall payments above tax-free limits.

As the triple lock continues to raise statepension values each year while allowances remain static, the number of retirees caught in this tax trap is expected to grow further.

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Tom Selby, of wealth manager AJ Bell, said: "Pensioners being taxed on at least a portion of their state pension income is an inevitable consequence of the freezing of tax thresholds and will only get worse in the coming years, particularly as the triple lock keeps ratcheting up the value of the state pension for millions of retirees.

"The only sensible route out of this mess is to unfreeze those thresholds, but that is unlikely to happen until the next decade at the earliest."

His comments underscore the structural nature of the problem, with no immediate policy relief on the horizon for affected pensioners despite the growing financial burden they face.

Adam Cole, of wealth manager Quilter, said: "With the personal allowance stuck in place while the state pension continues to rise, more retirees are being pulled into tax without any meaningful improvement in their living standards.

"For many pensioners, there is a growing disconnect between policy intent and lived experience. Income is rising largely because of government uprating decisions, yet tax allowances have failed to keep pace with inflation.

"The result is that pensioners are increasingly taxed on income designed to provide security, not discretionary spending."

The analysis highlights a fundamental tension at the heart of pension policy, where measures intended to protect retirees from poverty are simultaneously generating unexpected tax liabilities for hundreds of thousands.