Image source, Getty Images
- author, Sam Francis
- role, Political reporter
The Conservative Party has promised to increase tax-free pension benefits through the “triple lock plus” system if it wins the general election.
Under the plan, personal allowances for pensioners would increase by at least 2.5% or in line with earnings or inflation, whichever is higher.
Chancellor Rishi Sunak said the scheme “shows we are on pensioners’ side” and the Conservatives claim it could save pensioners £275 by 2030.
Labour called the policy a “desperate move by a confused Conservative party”.
At the moment, state pensions are already rising according to average earnings, wages or 2.5% – whichever is higher.
This means state pensions rose by 8.5% in April.
Both the Conservatives and Labour are committed to maintaining this policy, which is designed to ensure pensions keep up with price and wage rises.
However, the taxable income limit has now been frozen from 2021. Money received in pension form is also subject to income tax.
According to the independent financial watchdog, the Office for Budget Responsibility (OBR), state pensions are expected to exceed the tax-free personal allowance by 2027.
The Conservatives say this would mean millions of pensioners would have to pay income tax.
Age UK and Independent Age both said they have seen an increase in calls to their helplines in recent weeks from pensioners confused about the issue.
Under the new system, state pensions will always be below the tax-free limit.
The Conservatives claim the plan would cost £2.4 billion a year by 2029-30, but this would be paid for by a previously announced strategy to raise £6 billion a year through improved tax collection and a crackdown on tax evasion and fraud.
“I strongly believe that people who have worked hard all their lives should have peace of mind and security when they retire,” Sunak said.
“Thanks to the Conservative triple lock, pensions will be increased by £900 this year and next year there will be a tax cut of around £100.”
“This bold action shows we are on the side of pensioners – otherwise Labour would be making every full state pensioner subject to income tax for the first time in history.”
Labour’s shadow home minister, Jonathan Ashworth, said Mr Sunak “intends to reward the loyalty of Britain’s pensioners by betraying them, just as he has done with Prime Minister Boris Johnson and his own MPs”.
“Not only have they promised tens of billions of pounds more to spend since this campaign began, but they have also left a £46 billion package to scrap NHS funding completely unfunded, which threatens the very backbone of the state pension,” he said.
Sarah Olney, the Liberal Democrat Treasury spokeswoman, said: “The Conservatives have saddled pensioners with unfair tax increases for years and broken their promises on the triple lock.”
“After this record of failure, people will not be fooled by another empty promise from Rishi Sunak.”
