Money Wellness
Illustrated image of a older woman looking concerned next to a piggy bank. Pension Triple Lock Plus. Conservatives pledge tax cuts for pensioners
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calendar icon28 May 2024

Conservatives pledge tax cut for pensioners

The Conservatives have made a big promise to help out pensioners if they win the next election. Their plan is to raise the tax-free allowance for people getting a state pension.

Under the "Triple Lock Plus" scheme, the amount of money pensioners can earn before paying any income tax will go up by at least 2.5% each year. It could even rise in line with wages or inflation, whichever is highest.

Prime Minister Rishi Sunak says this will be worth £100 extra for 8 million pensioners next year. By the end of the next parliament, it could save them around £300 a year.

"This shows we're on the side of pensioners," said Mr Sunak. The move is designed to stop millions of people with the basic state pension from having to pay income tax.

Currently, the state pension is £221.20 per week. But the personal tax-free allowance is only £12,570 per year. This means some pensioners have been forced to fill out tax returns and pay tax on their pensions.

The Conservatives have promised to link the personal allowance for pensioners to the triple lock system. This guarantees the state pension goes up each year by the highest of earnings, prices or 2.5%.

Both Labour and the Lib Dems have also said they will keep the triple lock if they win the election.

The key things to know are:

• State Pension is currently up to £221.20 per week

• To get the full amount, you usually need 35 years of National Insurance contributions

• The triple lock means the state pension rises by the highest of earnings, prices or 2.5%

• The personal allowance is the amount you can earn before paying income tax - it's £12,570 this year

• Freezing the personal allowance can mean more pensioners have to pay tax on their pensions

What is the state pension?

The State Pension is money that the government gives to people when they get older. Most people can get up to £221.20 per week, which is paid every four weeks. You can claim the State Pension when you reach a certain age, which is usually:

• 66 years old

• 67 years old if you were born after April 1960

• 68 years old if you were born after April 1977

The amount you get depends on how much you have paid into the system over the years. To get the full £221.20, you usually need to have paid in for at least 35 years. You need to have paid in for at least 10 years to get anything at all.

What is the triple lock?

The state pension goes up every April, and this is called the "triple lock". This means the increase is based on whichever of these three things is the biggest:

• How much prices have gone up (inflation), using the September prices

• The average increase in wages between May and July

• 2.5%

For example, in 2023 the inflation rate was 6.7% and the average wage increase was 8.5%. This meant the State Pension went up by 8.5% in April 2024, from £203.85 to £221.20 per week.

How does the triple lock help pensioners?

If the cost of living goes up but your income stays the same, you end up worse off. This is because inflation makes the value of your money go down over time.

The triple lock makes sure the State Pension goes up by at least 2.5% every year. This means the State Pension has been going up faster than if it just followed inflation.

What is a personal allowance?

Everyone has a personal allowance, which is the amount of money you can earn each year before you have to start paying income tax.

For the 2024/25 tax year, the personal allowance is £12,570. If you earn less than this, you usually won't have to pay any income tax.

What is fiscal drag?

Fiscal drag is when the government doesn't increase the tax thresholds, which means more people have to start paying tax or pay tax at a higher rate, even though the tax rates haven't actually gone up.

How does fiscal drag affect pensioners?

If the personal allowance stays the same but the state pension keeps going up each year, pensioners will eventually earn more than the personal allowance. This means they will have to start paying tax on their income.

To stop this from happening, the Conservatives are promising to increase the personal allowance for pensioners. 

Avatar of Caroline Chell

Caroline Chell

Caroline has worked in financial communications for more than 10 years, writing content on subjects such as pensions, mortgages, loans and credit cards, as well as stockbroking and investment advice.

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