All pensions income up to €13,000 will be exempt from income tax under a government two-year plan announced in the Budget speech today.
€13,000 is equivalent to the highest pension given by the government, but Finance Minister Edward Scicluna said no income tax will be charged on the first €13,000 of any income from pensions.
Pensioners will still be taxed on any other income.
The measure is the most wide-ranging of a wealth of tweaks to the tax and social benefits system announced by the Finance Minister.
Most of the changes will benefit low-income people.
Women who did not pay enough social security contributions to qualify for a pension will see an increase of €50 while pension disparities between men and women will be removed.
The minister said the government has set itself a three-year target to help children out of the poverty line. Therefore, the in-work benefit for low-income parents with children will be increased by €200 to €1,200.
Working single parents will see an increase of €50 a year to €1,250.
Those with a low income who do not benefit from the in-work benefit will get an improvement of their supplementary allowance.
In total, the minister said, those on a minimum wage who make social security contributions will next year see an increase of €4 per week, whether through the in-work benefit, the supplementary allowance and the cost of living adjustment.
The €300 annual grant to those aged over 75 will be retained. Those who receive a service pension will be given an additional €200 next year.
We are effectively raising the minimum wage for low-income earners but not burdening the private sector. The government will shoulder all the burden
COLA of €1.75
The cost-of-living adjustment for all workers will see wages increase by €1.75 per week.
It was also announced that married pensioners on a minimum pension will see an increase of €4 per week.
Carer's allowance to rise
Means testing for eligibility to the carer's allowance will be removed. Those who are unmarried and do not work so that they can care for their parents will see their allowance increase by €35 per week to €140 per week.
Married people who take in their parents and care for them will be eligible for €90 per week.
A respite service for carers will also be introduced, with assistants being provided to take care of their relatives and give the carers a break.
Such measures are aimed at reducing demand for places at old people's homes.
Persons with disability
Patients who have the worst forms of disability, such as being in a vegetative state or bed-bound will see their social benefit rise to the level of the minimum wage.
Benefits will also be introduced for amputees, who will also be eligible for more free medicines.