Pensioners Could Still Pay Tax Despite ‘Triple Lock Plus’

A new study has revealed that millions of pensioners might still have to pay income tax on their state pension, even with the Conservative Party’s “triple lock plus” promise.

The “triple lock” ensures your state pension rises each year by the highest of inflation, average earnings growth, or 2.5%. The Conservatives have added a “plus” to this, meaning the personal allowance (the amount you earn before paying income tax) will also rise in line with the triple lock.

But, there’s a catch!

The study by pension experts LCP has found that a whopping 2.5 million pensioners – over one in five – receive a state pension higher than the £12,570 personal allowance. This means they already pay income tax on their pension, and the “triple lock plus” policy might not change that.

Why the difference?

The state pension isn’t a one-size-fits-all. Many people receive more than the standard £11,500 a year, thanks to things like:

  • Second state pension: This is also known as SERPS and is earned through working and paying National Insurance contributions.
  • Transitional arrangements: These were introduced to protect people from losing out when the state pension system changed in 2016.

The impact on different groups:

  • Older people: Those who reached state pension age before 2016 are more likely to have a higher state pension than those who retired afterwards.
  • Women: A significant number of women have larger state pensions due to inheriting payments from their late husbands.

The future of pension tax:

The Conservatives claim their “triple lock plus” policy will ensure the state pension is never taxed, but LCP’s research suggests this might not be entirely true.

The Labour Party’s position:

The Labour Party is against the “triple lock plus” policy and says it could lead to pensioners paying more tax.

What does this mean for you?

  • It’s important to understand that the amount of state pension you receive can vary greatly.
  • The “triple lock plus” policy might not completely eliminate tax on your state pension, even if it means a larger personal allowance.
  • You may still have to pay income tax on other sources of income, such as private pensions and savings.

The key takeaway:

While the “triple lock plus” might benefit some pensioners, it’s crucial to understand that it won’t necessarily make the state pension completely tax-free for everyone.