Pensioners in Britain risk ending up in a tax ‘nightmare’ without serious intervention from MPs, one of the country’s leading pension campaigners has said.
Baroness Ros Altmann is urging the major political parties, especially the Labor Party, to reform existing tax rules to prevent older Britons from losing part of their state pension to HM Revenue and Customs (HMRC).
There are growing “serious concerns” about the increasing tax burden on pensioners following the government’s decision to freeze tax thresholds. As it stands, every Brit has a personal savings allowance of £12,750, the amount of income someone can earn without paying tax.
Chancellor Jeremy Hunt previously promised to keep benefits frozen until 2028, but this has pushed more taxpayers into higher brackets. This is known as a budget drag, when people pay more taxes because the thresholds remain frozen at a time when incomes are rising.
This has also had consequences for pensioners, who are guaranteed to see their benefits increase thanks to the triple lock. State pensions increase annually on this measure, with payments increasing at the rate of inflation, average income, or 2.5 percent; whichever is higher.
In April, the full new state pension rose from £10,600.20 to 11,502.40 for the 2024-2025 tax year. While this doesn’t match the personal savings allowance, retirees are sleeping into a tax ‘nightmare’, experts claim.
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Speaking exclusively to GB News, Baroness Altman addressed the unique issues that arise as more and more elderly people have to pay more tax.
She explained: “I think it is crucial that pensioners know that they will not face new taxes on their pensions and that they will not have to deal with the nightmare of completing self-assessment tax forms, with the risk that they face fines and fines. fines if they don’t do this.
“Most retirees have never filed a tax return in their lives because their wages were handled at work.
“Labour has not promised that pensioners living on little more than the full new state pension will be able to rely on tax-free income, as has always been the case. This could prove to be a serious concern in coming years unless the tax threshold is raised.”
Ahead of the July 4 general election, the Conservative Party has promised to introduce the ‘triple lock plus’ in a bid to win over voters. If this is implemented, the tax-free amount on pensions would increase annually in line with the triple lock.
As such, older households would likely permanently avoid tax on their state pension alone. It should be noted that retirees often pay taxes because they have built up additional income from private pension savings.
The latest figures from HMRC show that around 8.5 million pensioners were liable for tax last year, at a time when the country’s tax burden is at its highest since the Second World War.
Following the 8.5 percent triple lock increase in state pensions earlier this year, experts believe the number of older taxpayers will exceed nine million, effectively doubling the number in 2010.
Baroness Altman added: ‘I would welcome a proper review of all aspects of pensions for the future, but this should be cross-party and probably independent, rather than political.
“The worst problems for retirees have often arisen from political scoring, rather than long-term policy thinking. Pensions should not be a political football, our millions of retirees must be able to rely on a fair and stable framework.”
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As part of its manifesto, Labor pledged to maintain the triple lock on state pensions, but stopped short of implementing the Tories’ proposed “triple lock plus”.
Following news of the Conservative policy, Shadow Business Secretary Jonathan Reynolds told the BBC: “I don’t think it’s credible, I don’t think it’s real, and I think pensioners will fully see through this.”
Jonathan Ashworth, the shadow paymaster general, has indicated that Labor is unlikely to introduce the ‘triple lock plus’ if the party returns to power.
He claimed it was “just another desperate move by a chaotic Tory party that is burning every remaining facade of its claims to economic credibility.”