Budget: Your personal finance questions answered

The coalition government's first Budget has signalled dramatic changes to both the tax and the benefits system. Questions abound, and Anne Redston, a tax and personal finance expert and professor at Kings College London, answers a selection of your queries.


Peter Gould, Caterham, Surrey: Is there any indication as to when the pension age is likely to rise to 66?

Not yet. There will be a review, which the government says will be 'conducted quickly'

Graham Haycroft, Letchworth, Herts: I am a working pensioner and my monthly tax bill is greater than my monthly state pension. The Government is promoting "senior citizens" to return or stay in work. Has the chancellor done anything in his Budget to address this?

If people over 60 work part time (16 hours a week), and have a low income, you can claim tax credits. Before this Budget, you would have had to work full time to get the credits.

I assume that you have other income and that is why your tax bill is so high? If not, you should get it checked.

Andrew Barnwell, Conwy: There appears to be nothing here regarding public sector pensions. Surely this most unfair of situations should be tackled before pay freezes?

The government has announced a review of public sector pensions, to be conducted by John Hutton. It is of course easier to freeze pay; reforming pensions is a difficult issue and likely to take longer.

John, London: What is meant by a link to earnings for state pensions from next April? Does this mean the more you are earning when you retire the more pension you will get?

No. Recently the state pension has increased by inflation each year. But the general increased level of earnings is often higher than inflation. So if inflation is 2%, earnings may have gone up 3%.

If pensions are only linked to inflation, pensioners can fall behind the rest of the population in terms of their standard of living. The government has now said that pensions will go up by the higher of inflation, earnings, and 2.5% per year.

Michael, Mansfield: I am a pensioner and would like to know if the tax allowance has been increased. If not, all pensioners will be paying more tax?

It is expected that pensioners will have their personal allowance increased in April next year, but the amount has not been confirmed yet. Pensioners already have a higher tax-free allowance than the working population.

D. Morgan, Morden: With the proposal to link pensions to pay, at what date in the year will this be made?

Usually they look at earnings figures in September, and the pension goes up by that amount from the following April

Angela, Bristol: How will the Budget affect pensioners on two pensions i.e. the state pension and pension received from a deceased husband's work pension. Both amount to approximately £13,000 a year. Also how will earnings-related pension effect this?

The government has said that state pensions will go up by the higher of inflation, earnings, and 2.5% per year. In addition, the tax-free allowance is expected to increase for pensioners, but the exact amount hasn't been confirmed. Serps is expected to go up by inflation next year.

Christine, Bempton: I left the NHS five years ago and have a preserved pension to be paid to me when I am 60, which is in 18 months time. Will the Budget affect this? I am due to collect my old age pension from the state, will this be affected too? I am a low earner on £12,606 per year and have no partner.

There are plans to review public sector pensions, including those from the NHS, but this will take some time. It isn't clear yet whether the review will affect people in your position.

All we know so far is that in the future, increases to public sector pensions will go up annually by the Consumer Prices Index (CPI). Currently they go up by the Retail Prices Index (RPI). This change will mean that future pension increases will be lower than if they had continued to use the RPI.

State pensions will go up annually by the higher of inflation, earnings, and 2.5%.


John Grayer, Weybridge: Has the freeze on increase in Serps been removed?

This wasn't mentioned, but we understand that next year it is likely to be increased by inflation.

Chris, Northampton: What is the threshold for the 40% tax? I thought this had been lowered by £1,000 to prevent higher rate tax payers from benefiting from the £1,000 raise in the tax threshold. I thought this would therefore cancel each other out, however your calculator shows that I am expected to pay £100 more tax following the changes as I am currently in the 40% tax bracket.

The aim is that you will be no better and no worse off after the changes. The government will adjust the numbers so that this is the case. The numbers given out at the time of the Budget, I agree, don't appear to work.

Timothy Jameson, Armagh: When will the £10,000 tax free allowance be coming into place?

It will come into place for the next tax year ie beginning in April 2011.


Jatinder, West Midlands: How does this Budget help married couples?

There is no special help for married couples in the Budget.

Emma-Louise Fellows, Bournemouth: Has there been any change to property stamp duty?

There has been no change.

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