Tories announce ‘Triple Lock Plus’ pension allowance

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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, wages 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.

Charities have been reporting heightened concern among pensioners who fear being dragged into paying income tax.

Both Age UK and Independent Age saying they have seen an increase in calls to their helplines in recent weeks from pensioners confused about the issue.

Under the new scheme, the state pension will always be below the tax-free threshold.

The Conservatives claim the plans will cost £2.4bn a year by 2029-30, funded by the previously announced strategy to raise £6bn annually through 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 to the BBC Radio 4’s Today programme, Paul Johnson from the IFS public spending think tank said the cost of the policy was “not a very big number, but these promises are beginning to add up.

“What this is, is a demonstration of priorities, and the priority is to take a few hundred thousand pensioners out of income tax.”

Mr Sunak said: “I passionately believe that those who have worked hard all their lives should have peace of mind and security in retirement.

“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 action demonstrates we are on the side of pensioners. The alternative is Labour dragging everyone in receipt of the full state pension into income tax for the first time in history.”

Shadow business secretary Jonathan Reynolds did not set out whether Labour would rule out a similar move but said he didn’t think the Conservatives’ plan was “credible”.

He said the government under Mr Sunak had frozen thresholds for income tax and that their proposal “contradicts what they’ve done in the last few years”.

Work and Pensions Secretary Mel Stride defended previously freezing thresholds – arguing it happened at a “very difficult time” citing Covid and increasing inflation.

“What we’ve been doing since is reducing taxes”,” he added.

Lib Dem Treasury spokeswoman Sarah Olney said: “The Conservative Party has hammered pensioners with years of unfair tax hikes and broken their word on the triple lock.

“People won’t be fooled by yet another empty promise from Rishi Sunak after this record of failure.”

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