Speaking on The Andrew Marr Show, Alistair Darling recognised the fact that some pensioners rely on income from savings to supplement their pension, and with falling interest rates, the amount earned is becoming insignificant.

He said that the issue would be addressed in the Budget because, he is “very conscious of the fact that particularly older people who very often rely on savings need to be helped.”

As the rules stand, pensioners have an increased personal allowance, which means that over 65s can earn up to just over £9,000 without paying tax, but according to The Telegraph, the Conservatives want to see this increased by a further £2,000 – which would save them as much as £400 in tax a year.

The Bank of England reduced the base interest rate to just one per cent last week. However, the Government charges pensioners claiming pension credits interest of £1 a week on every £500 over £6,000 they have in ‘capital’ (savings, investments and property) – the equivalent to 10.4 per cent APR, according to the BBC’s Money Box programme.

As a result, Age Concern is calling for the Government to raise the limit and halve the weekly reduction.

Age Concern’s Sally West told Money Box on BBC Radio 4, “The £6,000 capital limit hasn’t changed since 2001 and should be increased.

“It would also be much fairer to count, for example, £1 a week income for every £1,000 over the limit.

“That would still be much more than people could earn but it would seem to be a fairer system.”

The Budget, and its measures for saving pensioners, is expected to be announced slightly later than usual this year, as Darling told Andrew Marr, “It’s not something I think we need to rush into just immediately.”

© Fair Investment Company Ltd