People deriving income solely from state pension won’t be taxed, says chancellor

Clarification creates prospect of two-tier system for retirees solely on new state pension and those on private schemes

People who rely only on their state pension for their income will not have to pay tax on it, the chancellor, Rachel Reeves, has said, creating the prospect of a two-tier system for those in retirement.

The new state pension is poised to rise to 241.30 a week next April, putting the annual income for someone receiving the standard payment at 12,547 - just below the personal tax allowance of 12,570 a year.