At present, a full new State Pension is worth around £11,500 per year and the income at which everyone – working people and pensioners – start paying Income Tax is £12,570. Those who are entitled to a full new State Pension who also have a workplace or private pension income of less that £1,275 per year do not currently pay income tax but rises in the State Pension due to the Triple Lock put them at risk of doing so in the future.
The plans announced today by the Conservative Party, if they win the General Election, would ensure this group of pensioners will never face paying income tax. Pensioners who have a full new State Pension and an annual workplace or private pension income of over £1,250 are currently liable for paying Income Tax. However, the Conservative Party’s plans would result in them paying less tax in future as the income at which they would pay tax would rise in line with the State Pension Triple Lock.
Nigel Peaple, Director of Policy and Advocacy at the PLSA said: “Currently only half of pension savers are on track to achieve the retirement income identified as adequate by the influential and independent Pensions Commission, and we at the PLSA estimate that 20% of pensioners currently have an income below the Minimum Retirement Living Standard of £14,400. Today’s announcement will help many pensioners who have workplace or private pension income keep more of it by ensuring future increases in the new State Pension do not in themselves result in pensioners paying more income tax than they do now. This is likely to be welcomed by pensioners.
However, it is also important that the main political parties commit to improving the workplace pensions of younger workers by increasing the value of automatic enrolment pension contributions, gradually, over the next decade, from 8% to 12% of salary, with most of the rises falling on the employer.”
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