‘Pensioners are the forgotten vote that Labour and Tories need to remember,’ writes Selaine Saxby
‘Pensioners are the forgotten vote that Labour and Tories need to remember,’ writes Selaine Saxby
PA
Many people have contacted me since the Budget about the personal allowance, in particular pensioners, many of whom will not directly benefit from the significant cuts to National Insurance and feel that we as the Conservative Party and Government are ignoring them.
This is not the case. But given the number of quite misleading headlines that have been thrown out there by some political agitators, it may be helpful to explain where we are with the personal allowance and how it relates to pensions. Income earned through employment is taxable.
In general, benefits that are designed to replace income are also taxable, and the same applies to income from the State Pension.
The Government is supporting the incomes of over 12.2 million pensioners by maintaining the Triple Lock.
In April 2024, the full weekly rate of the basic State Pension will increase to £169.50. The full yearly amount of the basic State Pension is £3,700 higher, in cash terms, than in 2010. That’s £990 more than if it had been uprated by prices, and £1,000 more than if it had been uprated by earnings since 2010.
In 1999, Gordon Brown announced an increase to the Basic State Pension in line with the inflation rate – from £66.75 to £67.50. As a result, without the Triple Lock, in 2009 nearly a third of those over 65 were living on below-average incomes - one of the highest levels in Europe behind only Cyprus, Latvia and Estonia.
Jeremy Hunt
PA
Since 2010, there have been 200,000 fewer pensioners living in absolute poverty after housing costs, given the demographic changes in the UK that is quite an achievement.
In 2010, the tax-free personal allowance was £6,475, in 2024, at £12,570, it is now high by international standards. It is one of the most generous personal tax allowances in the OECD and the highest in the G7.
We do, of course, want to see everyone pay less tax on their earnings, but some will have noticed that as their state pension rises, the income from their private pension may fall.
Indeed, some people seem to think, driven again by the political agitators, that they are ‘losing money’. Income Tax is paid on private pension withdrawal, saving into a pension, tax was only ever deferred until it was withdrawn, reusing the now more generous personal allowance, and not paying National Insurance at all.
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Selaine Saxby
PA
As wages, benefits and incomes increase, a certain amount will always be clawed back through a progressive tax system.
If the personal allowance had been uprated by inflation every year since 2010-11, it would have been £8,765 in 2022-23, which is £3,805 lower than its current level of £12,570.
Nobody wants to see any fiscal drag, but in the last 14 years, successive Conservative-led Governments have accelerated the increase in the personal allowance for both income tax and national insurance. Given the national and global economic situation, these accelerated increases have sadly, but responsibly, been paused.
There will come a point when the State Pension could exceed the personal allowance and I believe that there should always be an income tax-free cushion between the State Pension and the Personal Allowance.
More does need to be done, but we should not be fooled by anyone to think that a significant increase in the state pension means that pensioners are ‘losing money’ or that this Conservative Government does not remain committed to looking after our pensioners.