What’s free when you’re a pensioner (and what isn’t)

When you’re planning for your retirement, one of the most important things to consider is how much money you might need to spend month on month. Taking your outgoings into account is a key part of pension planning, and retirement costs are usually lower than the amount you’ll spend while working.

After all, there’ll be less commuting to do, and you won’t have any of those workplace expenses - the clothes, working lunches and coffee shop purchases -  that soon start to add up.

Factor in lower housing costs - assuming you’ve managed to pay off your mortgage by the time you retire - and it’s soon easy to see why most people plan for a pension that provides two thirds of their working age income.

But to get a real handle on your expenses, you need to know what’s free for pensioners - and what isn’t - along with how your tax outgoings will change as a retiree.

Pension planning - what’s free when you’re a pensioner

A lot of what’s free to pensioners depends on your eligibility for Pension Credit. The government has a guide to eligibility on their website, but in simple terms, it applies to single people with a weekly income of lower than £218.15 and couples with a joint weekly income lower than £332.95.

If you’re eligible for Pension Credit, then as of 2025, you’re entitled to:

• A Council Tax discount
• A free TV licence (if you’re over 75)
• Discounted NHS dental treatment, glasses and transport costs to hospital appointments
• Winter fuel payments
• Housing benefits (if you rent) or mortgage interest support (if you own a home)
• Help with heating costs

Even if your pension pot means you aren’t eligible for Pension Credit,- there are a few things you’ll no longer need to pay for.

• All over 60s are eligible for free prescriptions and eye tests
• Over 65s in England have free off-peak bus travel
• Londoners over the age of 60 have free bus, tube and train travel via the Freedom Pass
• Over 60s in Scotland, Northern Ireland and Wales can claim a free bus pass

There are also a range of senior discounts and specials available if you look around, and it all begins to add up.

Retirement costs - what isn’t free for pensioners

First, there’s the elephant in the room. In the latest budget, the Chancellor announced that winter fuel payments are now means-tested. That means that unless you’re eligible for Pension Credit, you won’t receive assistance with your heating bills.

Because you’re likely to spend more time at home during retirement, the chances are those energy bills will be higher. So that means more money going out in the colder months than you’re used to.

If you’re planning ahead, you may want to make sure you have enough set aside for social care services. If you need extra support in retirement, care is very rarely free. Your local council will carry out an assessment of your needs - and your finances - leading to extra expenses for residential care or care in your own home.

This cost won’t be front of mind when you’re planning an active, leisurely retirement, but as people live longer, it’s definitely something you should take into account - especially if you’re planning on leaving a nest egg for family or loved ones. 

Do pensioners pay tax on savings?

In retirement, you will still pay tax on any interest you earn on your savings. The starting rate for tax on your savings is £5,000, added to your personal allowance (currently £12,750), so there is wiggle room before you’re taxed on your savings. But pensioners with a higher income will pay tax on savings.

There are still exceptions. If you have money in a tax-free account such as an ISA, that won’t count towards your allowance, meaning ISAs are still an efficient way to save for pensioners.

But it’s not just your savings you could be taxed on.

Do pensioners pay tax on pension income?

Much like when you’re employed, you have a tax-free personal allowance of £12,750. If you earn more than that in pension income, you will pay tax on it. 

Along with paying tax on your private pensions, you’ll need to pay income tax on any income from:

• Employment or self employment
• Your state pension and annuities (except for pensions under the War Pensions Scheme or Armed Forces Compensation Scheme)
• Dividends from shares you hold
• Income from properties you let out
• Certain benefits - including carer’s allowance
  Income from trusts

But don’t worry if you get lucky. You won’t be taxed on any lottery or Premium Bond wins!

There’s a lot to take into account when you’re pension planning, but the best place to start is with our simple pension calculator. In just 30 seconds, you’ll be able to see how much you stand to receive each month - making it easier to consider whether you’re able to afford all those things that aren’t free for pensioners.

We’re always looking to make saving simpler. To learn more about how to set goals, save for the future, or choose the right pension or ISA, visit the mynestegg Knowledge Hub.