The UK Conservative Party has pledged to increase the tax-free pensions allowance via a “Triple Lock Plus” if they win the general election. The proposal would increase the personal allowance for pensioners at least 2.5% or in line with either earnings or inflation. Prime Minister Rishi Sunak stated that the scheme “shows we are on the side of pensioners.” The increase is estimated to save pensioners £275 by 2030. Labour, however, has criticised the scheme for being non-credible.
Income tax thresholds have been frozen since 2021, and currently, income tax is paid on money received through pensions. Furthermore, by 2027 the state pension is expected to be higher than the tax-free personal allowance, resulting in many more pensioners paying income tax. Charities such as Age UK and Independent Age have reported growing anxiety among pensioners who are worried about being drawn into paying income tax and have seen an increase in calls concerning the issue.
The “Triple Lock Plus” aims to ensure that the state pension always remains below the tax-free threshold, subsequently saving pensioners from paying income tax. It is estimated to cost £2.4bn a year by 2029-30 and will be funded by the previously announced strategies to raise £6bn annually through tax collection improvement and cracking down on tax avoidance and evasion.
Previously, a similar policy was scrapped by former Conservative chancellor George Osborne. Paul Johnson from the public spending think tank IFS believes that the proposed scheme’s cost is “not a very big number but these promises are beginning to add up.” He further emphasised that the policy demonstrated priorities and that the priority with this plan is to take a few hundred thousand pensioners out of income tax.
Shadow Business Secretary Jonathan Reynolds criticised the Conservative’s plan by stating that the government’s proposal “contradicts what they’ve done in the last few years.” Work and Pensions Secretary Mel Stride defended previously frozen thresholds, citing Covid and increasing inflation; he added that the government has been “reducing taxes” since then. Liberal Democrat Treasury spokeswoman Sarah Olney reprimanded the Conservative Party, claiming that they have broken their word on the triple lock and that Mr Sunak cannot be trusted
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