Parliamentary scrutiny has intensified over the Treasury's handling of pension taxation concerns.
The Commons Petitions Committee has rejected Rachel Reeves' department's initial response to public demands for tax-free state pensions, deeming it inadequate.
The committee has instructed Treasury officials to return with a more comprehensive answer addressing the petition's core request.
MPs determined that the government's brief statement failed to engage properly with the fundamental issue raised by petitioners.
This marks a significant challenge to the Chancellor's position on pension taxation.
The committee's move demonstrates Parliament's determination to ensure ministers address public concerns about retirement income taxation.
The petition demanding tax exemption for state pensions has secured 17,000 signatures from citizens.
Petitioners argue that taxing state pension income is fundamentally wrong and should not add to individuals' tax liabilities.
The committee's ruling stated: "They felt the response did not respond directly to the request of the petition. They have therefore asked the Government to provide a revised response."
This direct rebuke highlights MPs' dissatisfaction with the Treasury's response.
The petition calls for state pension payments to be excluded from tax calculations.
State pension tax row deepens as MPs demand answers
|Parliament TV/Getty
It requests that these payments should not affect personal tax thresholds, reflecting growing frustration with retirement income taxation.
The Treasury's initial response defended the current taxation system.
Officials argued that making state pensions tax-free would be financially burdensome during difficult fiscal circumstances.
They maintained that such exemptions would add complexity to the tax framework.
Rachel Reeves' department stressed that wealthy pensioners earning above higher-rate thresholds would benefit more than those with modest incomes.
The Treasury noted that retirees earning below the Personal Allowance would see no advantage from such changes.
MP's weren't pleased with the response of Treasury officials
| GETTYMinisters emphasised their commitment to reviewing taxation through standard processes.
The Chancellor's team said that any modifications would be announced through fiscal events, maintaining established procedures.
The freeze on income tax thresholds through 2028 threatens to pull more retirees into tax obligations.
Helen Morrissey, retirement income specialist at Hargreaves Lansdown, said frozen allowances are "pulling more pensioners into taxpaying territory."
State pension values continue climbing under the Triple Lock guarantee.
This ensures annual increases match the highest of wage growth, inflation, or 2.5 per cent.
The Treasury noted that retirees earning below the Personal Allowance would see no advantage from such changes.
Ministers emphasised their commitment to reviewing taxation through standard processes.
The Chancellor's team said that any modifications would be announced through fiscal events, maintaining established procedures.
The freeze on income tax thresholds through 2028 threatens to pull more retirees into tax obligations.
Helen Morrissey, retirement income specialist at Hargreaves Lansdown, said frozen allowances are "pulling more pensioners into taxpaying territory."
State pension values continue climbing under the Triple Lock guarantee.
This ensures annual increases match the highest of wage growth, inflation, or 2.5 per cent.
In April, pensions rose by 4.1 per cent.
Government projections suggest future annual increases will average 2.5 per cent over the next four financial years.
This combination of rising pension values and static tax thresholds expands the tax net for retirees.
The system designed to protect pension power is pushing more citizens into tax liability.
Financial projections suggest the full New State Pension could reach £12,578.80 by the 2027/28 financial year.
That figure would surpass the Personal Allowance threshold by £78.80.
The Department for Work & Pensions | PAThis breach would create tax liabilities for pensioners receiving only basic state support.
Morrissey outlined strategies retirees could use to manage these obligations.
She said options include using the 25 per cent tax-free pension withdrawal alongside taxable income.
She also noted that pension contributions can reduce adjusted income, helping some avoid tax thresholds.
This is particularly relevant for those earning between £100,000 and £125,140 annually.
Morrissey described this as a "stealthy 60 per cent tax trap" that erodes personal allowances.