Under a new Tory Party plan, state pensioners will notice an extra £100 in their bank accounts, and that's "just the start."
State Pensioners Set to Receive £100 Boost Under New Tory Plan
Prior to the General Election, the Conservative Party pledged that the state pension will never be subject to taxes under policies it calls "triple lock plus."
According to the Conservatives, the new proposal will initially save eight million state pensioners £100 annually and increase their income by £275 annually by 2030. As stated by Mike Ambery, director of Standard Life's retirement savings, "The combination of rising wages and high inflation mean that the triple lock has been extremely valuable over recent years."
"So much so that it is rapidly closing in on the tax free personal allowance limit which has been frozen at £12,570 since 2021. The impact of this has been to drag more and more pensioners into the tax system and the proposal on the table is designed to ensure that a gap is always maintained between the state pension and personal allowance so that this income remains tax free."
Insights on 'Triple Lock Plus' from Benefits Consulting Leader
Mark Pemberthy, benefits consulting leader at Gallagher, highlights the potential impact of the 'triple lock plus' saying: "The introduction of the 'triple lock plus' means that the nil-rate tax threshold is set to increase, ensuring that pensioners won’t pay any tax on their basis state pension, even when it goes up.
"This is definitely positive news for those in receipt of the State Pension, but it does introduce some wider challenges. For instance, if the nil-rate band for everyone else does not increase simultaneously, there will be concerns about intergenerational fairness as workers would pay tax on a higher proportion of their income than pensioners.
"Particularly as that tax funds the payment of the state pension and the age that younger workers will start to receive their State Pension keeps getting pushed further and further into the future." Mr Ambery went on to say: "There is some precedent for different allowances for pensioners as they are currently exempt from National Insurance payments on earnings but this would be an additional advantage.
"The question likely to hang over this approach is one of intergenerational fairness as while there are a large group of pensioners struggling to get by, there are also many who are comparatively well off and it appears the policy would apply to both groups."