22 hours Ago By [email protected] (James Rodger)
State pension payments are poised to rise thanks to the Triple Lock promise - but people have been warned their pots will "become subject to tax". Tax allowances will remain at the same rate despite incomes and inflation increasing, with "fiscal drag" taking more and more pensioners over the threshold for tax. Currently, the full new state pension comes to £11,502.
40 per year and is expected to jump to £11,962 annually in April 2025. But experts have pointed out over how the rise takes the sums closer to the tax-free allowance on incomes on incomes which is £12,570. Claire Trott, the divisional director of Retirement Planning and Holistic Planning at St.
James’s Place, explained: "The freezing of thresholds often sounds like it isn’t going to impact many, but as wages increase over the years it pushes more people into paying tax and more into higher tax bands. READ MORE UK faces -5C snow within days and one part of England will be 'worst hit' "Take the state pension for example, with annual increases and a frozen threshold, more pensioners will become subject to tax on their private pensions sooner." 3.
1 million or one in five pensioners will be dragged into paying higher or additional rate tax by the 2027/28 tax year. 2.7 million people aged 60 and over are set to be pulled into the higher rate of income tax in the tax years 2022-23 to 2027-28.
And the data before Labour Party Chancellor Rachel Reeves' Budget also shows nearly 500,000 will be brought into the additional rate. Sir Steve Webb, former pensions minister and now partner at LCP, has also issued a key warning for pensioners. “From next year, roughly three in four UK pensioners will have to pay income tax, and just over a third of a million will be dragged into the tax net for the first time since they retired,” Sir Steve told i.
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