Conservatives pledge to increase tax-free pension allowance, opposition questions feasibility
The Conservatives have introduced a triple lock plus deal for pensioners, dubbed as such, but Labour’s Rachel Reeves dismissed it as another promise without proper funding.
If the Conservatives win the general election, they have pledged a triple lock plus deal for pensioners, a promise that Labour has declined to match due to credibility concerns.
Those receiving money from private pensions are subject to income tax, but individuals relying solely on their state pension do not pay tax on it.
However, by 2027, the Office for Budget Responsibility (OBR) estimates that the state pension will surpass the tax-free personal allowance, which is currently set at £12,570.
The state pension increases based on whichever is highest—average earnings, wages, or a minimum of 2.5 percent, known as the triple lock system.
Just last month, the state pension saw an increase of 8.5 percent.
The Conservatives argue that pensioners should not be taxed on their pensions, so they intend to raise the personal allowance for pensioners by at least 2.5 percent or in alignment with the highest of earnings or wages.
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Prime Minister Rishi Sunak stated that under Labour, pensioners would be £275 worse off annually by 2030, emphasizing that the Conservative scheme supports pensioners’ welfare.
Denouncing the Conservative plan as lacking in credibility, Labour’s shadow chancellor Rachel Reeves highlighted the triple lock plus policy as an additional unfunded commitment on top of the £64 billion in tax cuts pledged by the Tories.
Secretary of Work and Pensions Mel Stride assured that a Conservative government could easily raise the necessary funds for the heightened personal tax allowance by cracking down on tax evasion.
Stride Says Clampdown on Tax Avoidance Will Fund It
During an interview with Times Radio, Mr. Stride affirmed, “We can easily generate £6 billion through tackling tax avoidance and evasion, an attainable figure based on past achievements.”
“The head of the National Audit Office has confirmed that this figure is realistic and aligns with the funding requirements,” Mr. Stride added.
Addressing this issue on Times Radio, Mr. Stride clarified, “It’s £2.5 billion annually, with £1 billion derived from avoidance and evasion, and the remaining £1.5 billion from leveling up funding to reach the total.”
“So out of the £6 billion saved from avoidance and evasion, £1 billion goes to national service and the rest is allocated for this pivotal tax reduction for our pensioners,” he elaborated.
Mr. Stride previously told Sky News that this policy would grant millions of pensioners a “tax reduction over time.”
He expressed, “Labour has disapproved, asserting they wouldn’t pursue it, which will lead to millions of pensioners being taxed in due course.”
Lib Dems Say ‘People Won’t Be Fooled’
The Treasury spokeswoman of the Liberal Democrats, Sarah Olney, criticized the Conservative Party for past tax hikes on pensioners and breaking promises regarding the triple lock system.
She added, “Rishi Sunak’s latest assurance after numerous failures won’t deceive the public with another empty vow.”
Paul Johnson, director of the Institute for Fiscal Studies, contended on BBC Radio 4’s “Today” show that pensioners previously had a higher personal allowance compared to the working-age population, a policy reversed by the Conservatives.
He explained, “Looking ahead, this is essentially a reversal of a tax increase proposed by the Conservatives, where the allowance remains stagnant for three years, instead of adjusting in line with inflation. So, part of the resulting cost is simply avoiding the previously proposed tax hike,” Mr. Johnson concluded.
The OBR predicts that maintaining the frozen personal tax income threshold since 2021 will lead to 4 million additional taxpayers by 2028.
Speaking at the Rolls-Royce factory in Derby, Ms. Reeves stated, “The Conservatives are undermining the intellect of millions, especially those grappling with the fallout of their failures. We won’t allow them to escape accountability, as their 14-year track record speaks volumes.”
“Despite five prime ministers, seven chancellors, and a dozen growth manifestos, each less effective than the last, the economic growth achieved by OECD countries over these 14 years would have enriched our economy by £150 billion today,” she remarked. “This amounts to £5,000 per household and an additional £55 billion for public services,” Ms. Reeves added.
PA Media contributed to this report.
