Older voters have been promised an even bigger guarantee of their income, with the ‘triple lock plus’ coming in if the Tories stay in power.
It sounds like a complicated contraption making it very hard to open a door, but it’s a metaphor meaning state pensions will keep their value in real terms, no matter what is happening in the economy.
The ‘triple lock’ was introduced in 2010, when the Tory/Lib Dem coalition came to power, and means that the annual increase in state pension will be based on whichever is highest of three values: inflation, the average increase in UK wages, or 2.5% at minimum.
Unsurprisingly popular with pensioners, the policy has nonetheless been criticized by others who say it is unsustainable with an ageing population.
Rishi Sunak now plans to beef it up even further with an added promise that pensioners will get to keep more of their income than other age groups before it is taxed.
He said he would increase the personal allowance for those of pension age, while keeping it frozen for working-age adults, meaning that the full state pension would not risk falling into tax no matter how much it went up.
The personal allowance of income earned tax-free is the first £12,570 as standard for everyone, except those earning over £125,140 who aren’t entitled to it.
Currently, the full state pension is £11,502 a year, so approaching the taxable level if it kept on increasing while personal allowance remained frozen.
Rishi Sunak said that if he wins the General Election on July 4, personal allowance would also rise by the triple-lock tests, for pensioners only.
So their tax-free earnings allowance would increase by at least 2.5% each year, and possibly much more, always keeping pace with pensions.
While some dubbed this the ‘quadruple lock’, the government settled on ‘triple lock plus’.
It’s a bit of a mouthful especially if you weren’t even sure about the original triple lock, but you can expect to hear that term a lot more over the coming weeks.
The policy would amount to a tax break of £95 in 2025-26, rising to £275 in 2029-30.
By 2029/2030, it would cost £2.4 billion a year and the government said it would be funded through clamping down on tax dodgers – the same pot of money which will help pay for mandatory National Service for teenagers, another flagship Tory election policy.
Under the Conservatives, the State Pension had risen by £3,700 – and is increasing another £900 this year.
It means a guarantee in legislation that the pensioners’ personal allowance will always be higher than the level of the new state pension.
But Labour said it was a ‘desperate move’ from a party which was ‘torching’ what was left of its claims to economic credibility, and they wouldn’t be offering it themselves.
Positioning himself as financially responsible, Keir Starmer had a boost this morning as dozens of business leaders signed an open letter endorsing the party’s economic plans.
Announcing the pensions policy, Mr Sunak said: ‘Thanks to the Conservatives’ triple lock, pensions have risen by £900 this year and now we will cut their taxes by around £100 next year.
‘This bold action demonstrates we are on the side of pensioners. The alternative is Labour dragging everyone in receipt of the full state pension into income tax for the first time in history.’
It is a regular payment from the government which most people can claim when they reach a certain age: currently 66 years old for both men and women.
Not everyone gets the same amount, as how much you get depends on your National Insurance contributions while working.
The full amount is currently £221.20 per week under the system from 2016.
Many pensioners will also rely on income from other sources, such as private workplace pensions.
But Institute for Fiscal Studies director Paul Johnson pointed out that about half the cost of the plan was from not imposing three more years of frozen personal allowances on pensioners.
‘So the £100 “saving” next year is mostly just avoiding a £100 tax increase, rather than an actual giveaway.’
And Torsten Bell, chief executive of the Resolution Foundation think tank, said the ‘biggest beneficiaries of another tax system complication will largely be better-off pensioner households’.
Meanwhile, Sam Bidwell of free market think tank the Adam Smith Institute said: ‘The state pension could be financially unsustainable as soon as 2035, a worrying trend which this policy will only exacerbate.
‘At a time when working-age people are being squeezed by higher taxes and the cost of living, tax cuts should focus on making work pay, rather than being given to every single pensioner, even those who are millionaires.’
