image source, Good pictures
- author, Sam Francis
- stock, Political Correspondent
-
The Conservatives have promised to increase tax-free pensions by a “triple lock plus” if they win the general election.
Under the plans, individual allowances for pensioners will increase by at least 2.5% or higher according to earnings or inflation.
Prime Minister Rishi Sunak said the plan “shows we are on the side of pensioners”, saying the Tories would save £275 by 2030.
Labor said the government’s plan was not “credible”.
At the moment, the state pension is already high – rising in line with the higher of average earnings, wages or 2.5%.
This means the state pension rose by 8.5% in April.
Both the Conservatives and Labor are committed to the policy, which is designed to ensure pensions keep pace with rising prices and wages.
But income tax caps are now frozen from 2021 – the independent watchdog, the Office for Budget Responsibility (OBR), Estimated This would create 4 million additional taxpayers by 2028 and move 3 million to a higher tax rate.
Income tax is paid on the money received through pension.
By 2027, the state pension is expected to exceed the tax-free personal allowance according to the OBR.
According to the Tories, that would mean millions more pensioners paying income tax.
Both Age UK and Independent Age say they have seen an increase in calls to their helplines in recent weeks.
Under the new scheme, the state pension will always remain below the tax-free threshold.
The Conservatives say the plans will cost £2.4bn a year by 2029-30, funded by a previously announced strategy to raise £6bn annually by improving tax collection and cracking down on tax avoidance and evasion.
A similar policy existed in the past but was scrapped by former Conservative chancellor George Osborne.
Speaking on BBC Radio 4’s Today programme, Paul Johnson, of the IFS public expenditure think tank, said the cost of the policy was “not a huge amount, but these promises are starting to add up.
“What this is, is a demonstration of priorities, and the priority is to get a few hundred thousand pensioners out of income tax.”
Mr Sunak said: “I strongly believe that people who have worked hard all their lives should have peace of mind and security when they retire.
“Thanks to the Conservatives’ triple lock, pensions have risen by £900 this year and now we will cut their taxes by around £100 next year.
“This bold move shows we are on the side of pensioners. Instead, Labor will drag all state pensioners into income tax for the first time in history.”
Shadow business secretary Jonathan Reynolds did not say whether Labor would rule out a similar move, but said he did not think the Conservatives’ plan was “credible”.
He said the government under Mr Sunak had frozen the limits on income tax and their plan was “contrary to what they have done in the last few years”.
Work and Pensions Secretary Mel Streide previously backed freezing the limits – citing Covid and inflation as the reason it came at a “very difficult time”.
“What we are doing is reducing taxes,” he added.
Lib Dem treasury spokeswoman Sarah Olney said: “The Conservatives have hit pensioners with unfair tax rises for years and broken their word on the triple lock.
“People will not be fooled by another empty promise by Rishi Sunak after this record of failure.”
