Rachel Reeves is under pressure to consider a bold tax move that could change life for pensioners

Chancellor Rachel Reeves is facing increasing pressure to make a controversial move that could affect millions of pensioners across the UK. For the first time in history, retirees might be asked to pay National Insurance, something they have never had to do. This idea is not coming from a small campaign group but from one of Labour’s most trusted think tanks, the Resolution Foundation, which is known to have close ties to the government.

Reeves’s upcoming autumn Budget is being heavily influenced by Torsten Bell, who led the Resolution Foundation for ten years before becoming a Labour MP. He is now the pensions minister and is said to be playing a major role in shaping the Budget. Critics believe this kind of tax change is exactly the type of policy he would support.

Bell is not the only person from the think tank to rise into important Labour positions. Dan Tomlinson, another former economist at the Foundation, has just been made secretary to the Treasury. Baroness Minouche Shafik, who also worked with the group, is now advising Labour leader Sir Keir Starmer directly on economic issues. In other words, wherever Rachel Reeves looks, she finds former Resolution Foundation staff guiding policy decisions.

The latest proposal from the think tank could bring in about £6 billion every year by requiring around 8.7 million pensioners—more than two-thirds of the UK’s retirees—to start paying National Insurance. On paper, Labour has promised not to increase income tax, NI, or VAT, but the Foundation has suggested a clever way around that pledge. It wants the NI rate cut from 8% to 6%, while at the same time rolling part of NI into income tax. The effect would be that people who don’t currently pay NI, including most pensioners, landlords, and self-employed workers, would suddenly find themselves paying more tax—though it would technically be called income tax.

For pensioners, this change could mean paying an extra 6p in tax for every pound of income. Many older people are already struggling with tax rises. Because income tax thresholds are frozen until at least 2028, more pensioners are being pulled into higher tax bands. From 2027, even those who only rely on the full state pension will be paying income tax, since the state pension will exceed the tax-free allowance. For those with even a small amount of extra income, their tax burden could grow heavier under these plans.

Nothing is confirmed yet—the Budget is set for November 26. But history shows that when the Resolution Foundation puts forward an idea, Labour often listens. Reeves has already adopted their recommendations on inheritance tax and capital gains tax. Starmer has also just hired one of their leading experts to advise him, which suggests these ideas are not being taken lightly.

Supporters of the plan argue that it would mainly affect wealthier retirees who can afford to contribute more, while poorer pensioners would remain unaffected because their incomes are too low. Critics, however, say it amounts to an unfair raid on pensioners who have already spent decades paying taxes and National Insurance during their working lives, only to face another bill in retirement.

The concept of making pensioners pay NI is not new. Former Prime Minister Boris Johnson considered it back in 2021 but abandoned the plan. Now, with Labour in charge, it has resurfaced as a serious option. If Reeves decides to adopt it, millions of retirees could be hit with a new tax bill. If she rejects it, many believe the Resolution Foundation will simply return with fresh proposals to raise money from pensioners in the future.