Stealth taxes to wipe out three-quarters of state pension rise

Stealth taxes will wipe out more than three-quarters of Monday’s rise in the state pension, new analysis has revealed.

The basic state pension has risen by £692 under the triple lock, in line with wage growth of 8.5 per cent, to an annual total of £8,814.

But analysis by the House of Commons Library shows a freeze in the personal allowance means that the average pensioner who pays the basic rate of tax will have to pay £530 a year, which is equivalent to 77 per cent of the increase.

About eight million pensioners, or seven in 10, are taxpayers who are affected by frozen tax thresholds but will not benefit from this month’s cut in National Insurance because they are already exempt from paying NI.

The Liberal Democrats, who commissioned the analysis, accused Jeremy Hunt, the Chancellor, of “taking a bolt cutter to the triple lock” and said pensioners deserved a better deal.

Wendy Chamberlain, the party’s work and pensions spokesman, said: “This Conservative government is picking pensioners’ pockets to try and fill the black hole caused by their disastrous economic policy.

“These are people who have played by the rules their whole lives, paid their taxes and contributed so much to our society. They expect that in their older years the Government would look after them, not place even more financial hardship upon them during a cost of living crisis.

“Millions of pensioners across the country are sick to the back teeth of being taken for granted by the Conservative Party. Rishi Sunak and Jeremy Hunt should expect a reckoning at the ballot box as pensioners abandon this Conservative Government in their droves.”

‘Another cynical announcement’

Last week, a separate analysis by the Lib Dems found that up to 1.6 million more pensioners will be paying income tax within the next four years after the Government froze the threshold at which people start to pay.

Paul Maynard, the pensions minister, dismissed the Liberal Democrat analysis as “another cynical announcement” and said the party had “no plan”.

“It was a Conservative government that introduced the pensioner triple lock, delivering a brighter future for pensioners and lifting 200,000 more pensioners out of poverty since 2010,” Mr Maynard said.

“The Conservatives are the only party that will back British pensioners.”

Conservative sources noted that the state pension had increased by £3,700 since the party took office in 2010, while the number of pensioners living in absolute poverty has fallen by more than 200,000 in the same time period.

The personal allowance is still high enough that pensioners who only receive a full basic or new state income will not pay any tax on this, and will only start paying income tax at £12,570.

A Treasury spokesman said: “Pensioners do not pay any income tax if their sole income is from the full new state pension.

“We are standing by our commitment to maintain the triple lock by raising the basic state pension to almost £170 a week, after the largest ever cash increase last year.”