Alistair Darling provided some cheer to pensioners by announcing he would increase the basic state pension and prolong higher Winter Fuel Allowance levels for another year.

The Chancellor re-affirmed a commitment to increase the state pension by at least 2.5 per cent in his speech yesterday.

“If RPI inflation this September is below zero, as we expect, pensioners can be confident that their pensions will rise in real terms,” he said.

Elderly residents were also told the Winter Fuel Allowance will be kept at a higher level of £250 for over-60s, and £400 for over-80s, for another year.

Michelle Mitchell, charity director for Age Concern and Help the Aged, said: “Maintaining the Winter Fuel Payment, measures to help grandparents and help for low-income savers will provide cheer to pensioners in an otherwise gloomy Budget.

“But the failure to do more to tackle fuel poverty will continue to leave many pensioners out in the cold.”

Mr Darling also announced grandparents who are carers of children will see that work qualify towards their state pension.

There was also some relief for pensioners with small savings, as the disregard for qualifying for Pension Credit will be raised from its current level of £6,000 to £10,000.