Tax warning hits thousands of pensioners at risk of being dragged into HMRC net | Personal Finance | Finance

The full new state pension is currently £221.20 a week, or £11,502.40 a year, which is just £1,000 away from using up the personal allowance for income tax, at £12,570 a year.

M‌r Massey said the Conservatives’ policy could take hundreds of thousands of pensioners out of paying income tax but it would impose large costs on the Government.

He said: “The Institute for Fiscal Studies estimates that this new policy will take 750,000 pensioners out of income tax altogether next year. The triple lock plus, if enacted, would cost an additional £2.4billion a year by 2030.”

He warned the triple lock metric for the yearly state pension increase is also piling pressure on the Government budget, after an 8.5 percent increase last month following a record 10.1 percent boost in April 2022.

The academic said: “Clearly, the existing triple lock has its merits. It has provided pensioners with the security that their state pension earnings, in real terms, will not be negatively impacted by inflation, or outstripped by wage growth.

“However, the policy is not without cost. The triple lock has added £11billion to public spending since its inception, compared to a single, or double lock using either prices or earnings.

“Happily, pensioners are living longer and healthier lives, but alongside the triple lock, this also means that the cost of the state pension continues to increase.”

He warned the costs of the triple lock could soon become “unsustainable” with current weak economic growth.

Turning to potential alternatives to the policy, Mr Massey said: “A potential solution to these problems would be to guarantee that the state pension would rise by at least inflation, with a future overall target level provided as a percentage of median earnings.

“This would take away uncertainty for pensioners and for the public purse but would also mean breaking the triple lock.”

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