Millions of pensioners in the UK are set to be worse off after chancellor George Osborne announced a surprise raid on income tax breaks currently enjoyed by over-65s.From April 2013, people aged 65 and over will no longer receive a larger tax-free personal allowance than people of working age, as Mr Osborne looked to "simplify" the tax system.The plans will also save the government over £1 billion by 2015, according to estimates, but the proposals have been met with staunch opposition from organisations representing older people in the UK.Dr Ros Altmann, director general of Saga, said: "This budget contains an enormous stealth tax for older people. Over the next five years, pensioners with an income of between £10,000 and £24,000 will be paying an extra £3 billion in tax."Currently, over-65s enjoy a larger personal allowance than workers, with those aged between 65 and 74 not required to pay tax on any income below £10,500 from April and over-75s enjoying a personal allowance of £10,660. This compares favourably with the tax-free income threshold for those aged under 65, which is due to rise to £8,105 next month.However, from April next year, the allowances will be frozen for existing pensioners, while those retiring in the future will not be eligible - meaning that they will only benefit from the same tax-free allowance as workers.It is estimated that those approaching retirement will be worse hit and lose out on an average of £259 a year as they switch to the standard personal allowance, which will be £9,105 from April 2013.HM Revenue and Customs claim that 4.41 million people will be worse off from 2013-14 as the new regulations come into force.Joanne Segars, chief executive of the National Association of Pension Funds, said: "This will come as a blow to millions of pensioners who have paid in to the tax system throughout their working lives."Pensioners with modest amounts of pension saving stand to be the biggest losers."
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Tax allowances and state benefits