In the future the Basic State Pension is going to start increasing in line with earnings. (At the moment it goes up in line with prices). The Government has said that it aims to restore the link with earnings at least by 2012 and is committed to doing it no later than 2015.

The Government is proposing to improve retirement planning by requiring employees to save for their retirement in addition to their State Pension. The exact format for these savings has yet to be finalised but it may involve paying both employee and employer contributions to an employer’s pension scheme, a personal pension or into a new type of arrangement called a ‘personal account’.

From April 2008 people aged 65 will not pay tax on earnings below £8,460, reducing the number of pensioners who pay tax by 580,000.

By April 2011, no pensioner aged 75 or over will pay any tax on income under £10,000.