The Prime Minister has pledged to raise the tax-free personal allowance in what will be called a ‘triple lock plus’.
Under the new rules, pensioners’ allowances could rise in line with either average earnings, inflation or by 2.5% – whichever is higher – in April 2025.
It means the level of income tax pensioners will have to pay will always be under the tax-free threshold.
On 8 April, the full weekly state pension rose by 8.5% to £11,542 per year, working out at £221.20 each week.
As it stands, the tax threshold was confirmed to freeze at £12,570 and was expected to stay at that level until April 2028, meaning retirees would be close to that tax-free limit if they earned any other taxable income.
Wellness and wellbeing holidays: Travel insurance is essential for your peace of mind
Out of the pandemic lockdowns, there’s a greater emphasis on wellbeing and wellness, with
Sponsored by Post Office
‘Triple lock plus’ may only apply to over-66s
However, if the Conservatives are victorious on 4 July, the change in tax would only apply to those aged above the state pension age of 66 years old.
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 current triple lock mechanism guarantees the state pension rises each year by the largest amount of:
- Average earnings growth
- The rate of inflation
- Or by 2.5%
Meanwhile if the ‘triple lock plus’ gets the green light, the change would be a popular decision for many pensioners.
Two-thirds (41%) of those aged above 65 years old said they would be less likely to vote for a party that ditched the triple lock mechanism in favour of an inflation-based model, according to an AJ Bell survey of 2,000 respondents.
Further, just 37% of voters aged under 34 would be more likely to do the same.
‘Naked grab for pensioner votes’
Tom Selby, director of public policy at AJ Bell, said Rishi Sunak has “doubled down” on the triple lock deal, “promising not only to keep the pledge but extend it to the personal allowance for those over state pension age”.
Selby said: “This is a fairly naked grab for pensioner votes that the Conservatives know will be crucial if it is to claw back Labour’s massive poll lead.
“The fact Sunak has not promised to increase the personal allowance for younger voters at the same time means he would effectively be driving a wedge between generations via the tax system. Creating a separate tax threshold for older people would also add unwelcome complexity to the income tax framework.”
Selby added: “Beyond pure election tactics, it is hard to think of a good reason to increase the personal allowance for pensioners alone. It would make much more sense to come clean about the aim of the triple lock, which has never been articulated, and then set a sensible path to achieving that aim.
“Instead, we are left with the random ratchet of the triple lock with no clear goal, and the increasing likelihood the state pension age will need to rise faster to cover the cost – meaning it will be those below state pension age who end up paying the price again.”
