This article by political reporter Sam Francis was first published on BBC news.
The Conservatives have promised to raise the tax-free pension allowance via a “Triple Lock Plus” if they win the general election. Under the plans, the personal allowance for pensioners will increase at least 2.5% or in line with the highest of earnings or inflation. Prime Minister Rishi Sunak said the scheme “shows we are on the side of pensioners,” who the Tories say will save £275 by 2030. Labour said the government’s plan was not “credible”. At the moment, the state pension already rises in line with whichever is the highest – average earnings, inflation or by 2.5%. This meant in April the state pension rose by 8.5%.
Both the Conservatives and Labour are committed to keeping the policy, designed to ensure pensions keep up with rising prices and wages. But currently income tax thresholds have been frozen since 2021 – the independent watchdog, the Office for Budget Responsibility (OBR), has estimated that will create 4m extra taxpayers by 2028 and take 3m into the higher rate of tax. Income tax is paid on money received via pensions. By 2027, the state pension is expected to be higher than the tax-free personal allowance according to the OBR. That would mean many millions more pensioners paying income tax, according to the Tories…