Tax credits reward saving

More than 8 million pensioners will be better off under sweeping tax and benefit changes unveiled by the Government yesterday.

More than 8 million pensioners will be better off under sweeping tax and benefit changes unveiled by the Government yesterday.

From 2003, single pensioners with an income of up to £135 a week and couples with an income of up to £200 will get a cash credit on top of their basic state pension and will no longer be penalised if they have saved for their retirement.

Alistair Darling, Social Security Secretary, told the Commons the new pensioner credit would benefit 5.5 million old people with savings or a modest income, two-thirds of them women. The top-up would be worth between £1 and £23 a week. He said: "For the first time in the history of the welfare state, saving will be rewarded, not punished."

Mr Darling said a further 3 million pensioners who currently pay tax would be better off from the tax reforms. By 2003, the tax-free allowance should rise to £6,560 a year for those aged 65 to 74, and £6,850 for those aged 75 and over.

The Government would no longer assume that people would get a 20 per cent return on savings but would be assessed on their actual income, Mr Darling added.

But a spokesman for the charity Age Concern warned: "The good intentions behind the pensioner credit could yet be thwarted by its complexity. It would be more straightforward to deliver retirement income through an adequate basic state pension."