Tories announce new tax-free allowance for pensioners with 'triple lock plus'

Pensioners would get a personal tax allowance that rises in line with the triple lock under the new scheme.

Related topics:  Later Life,  Pension,  Triple lock
Rozi Jones | Editor, Barcadia Media Limited
28th May 2024
jar of money protected by chain and lock
"Sadly, although the 'triple lock plus' undoubtedly has merits, last-minute policies from a party bracing for defeat are not what pension planners need."
- Lily Megson, policy director at My Pension Expert

The Conservative government have pledged to introduce a 'triple lock plus' scheme with new tax cuts for pensioners.

Currently, pensioners can receive £12,570 a year before they start paying income tax, the same as the personal allowance for workers.

However, from April the Conservatives have pledged to increase the personal allowance for pensioners in line with the triple lock by introducing a new age-related allowance.

That means that for pensioners, both the state pension and their tax-free allowance will always rise in line with the highest of earnings, wages or 2.5%: the new triple lock plus.

This would result in a tax cut of around £100 for 8 million pensioners from next year, which would increase over time to around £300 a year by the end of the parliament. The existing triple lock forecasts will see the state pension rise by £430 next April – and by around £1,700 a year by the end of the parliament.

Lily Megson, policy director at My Pension Expert, commented: "It’s a clear sign that Sunak is reverting to the old tried-and-tested model of trying to woo older voters immediately before a general election. Sadly, although the 'triple lock plus' undoubtedly has merits, last-minute policies from a party bracing for defeat are not what pension planners need.

"For too long, those in or nearing retirement have been overlooked. Meaningful policy to help address the financial challenges faced by over-60s has been lacking for many years, especially during the cost-of-living crisis. Sunak's late bid to close the gap on Labour by announcing favourable tax changes for those receiving a pension will do little to offer meaningful long-term assistance to those who have struggled under the burden of high inflation, high interest rates and a high tax burden."

Mike Ambery, retirement savings director at Standard Life, added: "The combination of rising wages and high inflation mean that the triple lock has been extremely valuable over recent years. So much so that it is rapidly closing in on the tax free personal allowance limit which has been frozen at £12,570 since 2021. The impact of this has been to drag more and more pensioners into the tax system and the proposal on the table is designed to ensure that a gap is always maintained between the state pension and personal allowance so that this income remains tax free. There is some precedent for different allowances for pensioners as they are currently exempt from NI payments on earnings but this would be an additional advantage. The question likely to hang over this approach is one of intergenerational fairness as while there are a large group of pensioners struggling to get by, there are also many who are comparatively well off and it appears the policy would apply to both groups."

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