Retirees could be dragged into paying tax on their state pension from next year
Pensioners Face A Difficult Winter (Image: Getty Images)
Andy Burnham has been urged to rule out retirees paying tax on the state pension from next year. Concerns have been raised with the benefit set to surge past £13,000 for the first time. Tax becomes payable at the current threshold of £12,570, which means pensioners would be liable beyond that amount.
Rachel Reeves, the former Chancellor, said last year that people solely reliant on the state pension would not have to pay the tax. But Business Secretary Jonathan Reynolds set alarm bells ringing on Tuesday, as he refused four times to rule out a tax raid on pensioners.
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Andy Burnham (Image: Getty)
Mr Reynolds said it was a matter for next month’s Budget on October 28.
He told the BBC: “The majority of pensioners in this country don’t just rely on the state pension. Some do, I accept that, but the majority don’t.
“So I think sometimes when this is looked at, we’re focusing just on the state pension side of this. You’ve got to consider the full range of income retired people in the UK have, living the good lives they deserve in their retirement.”
However, pensions minister Torsten Bell later insisted Labour would not put up taxes on people who rely on the state pension.
It is still unclear how this will be implemented, given the complexity of separating the tax arrangements of different groups of pensioners.
Conservative Shadow Chancellor Andrew Griffith warned: “Unless Burnham acts, Labour are about to tax pensioners.
“People living on nothing but their state pension are facing a tax bill for the first time ever.
“Many will spend the last years of their lives filing tax returns or hanging on HMRC telephone helplines.”
His Reform UK counterpart, Robert Jenrick, also blasted: “It’s no surprise to see Labour’s business secretary entertain taxing the state pension.
“They have lost all respect for working people and view their money as the government’s to seize.”
The row erupted as official figures showed the state pension is likely to go up by the same rate as wages, a rise of 3.9%.
Under the Triple Lock guarantee, this means it will jump by £488 to £13,036.40 a year.
The old basic state pension – for those who reached state pension age before April 2016 – will likely be £192.10 a week, or £9,989.20 a year, an increase of £374.40.
Campaign groups have said older people face significant cost of living pressures, such as high energy bills, and the state pension itself remained relatively small compared with state provision across Europe.
Dennis Reed, founder of the Silver Voices organisation (Image: Rowan Griffiths / Daily Mirror)
Dennis Reed, director of Silver Voices, said: “The majority of pensioners on the old state pension of £185 per week will only receive an increase of about £7 per week next April, hardly enough to buy two coffees, so all this talk of the Triple Lock ‘ratcheting up’ older people’s living standards is a load of baloney.
“It is certain that energy prices will rise faster than 3.9% by next year, and food prices look like going the same way.
“Taken together with council tax and utility price rises in April, older people will again be out of pocket despite the Triple Lock, and pensioner poverty will rise further.
“And we face the double whammy of frozen tax thresholds diluting the value of our Triple Lock increases.
“It is essential that the Chancellor lifts the lower tax threshold in his Budget to provide meaningful cost of living relief to all low income families, including pensioner households on modest incomes”.
Almost 13 million people receive the state pension in the UK.
The Triple Lock policy, which the Daily Express has campaigned hard to keep, guarantees that the state pension will increase by either average wage growth, inflation or 2.5% – whichever is highest.
Labour made a manifesto pledge to keep it until 2029, however economists have warned about the cost of the policy ahead of the Budget although pensioner groups say many people still face poverty in old age.
Mr Bell, the pensions minister, said Labour’s commitment to pensioners remains.
“In line with the commitment made at Budget 2025, pensioners who only just exceed the personal allowance will not have the administrative burden of paying small amounts of tax in this Parliament,” he said.
But analysis by consultants LCP suggested that only one in 16 pensioners would benefit if the government kept to its previous pledge, saving about £91 each a year.
The majority of pensioners have additional pension income and so pay income tax already.
“The government’s plans to address this point are a mess,” said Sir Steve Webb, a partner at LCP and a former Liberal Democrat pensions minister.
Later Life Ambitions (LLA) spokesman Alan Lees, said: “An increase in the State Pension will be welcome, particularly for those who rely on it as their main or only source of income. “However, £488 is the maximum increase, and many pensioners will receive less depending on their individual entitlement.
“The triple lock remains an important safeguard against pensioner poverty, but security in later life depends on more than one annual increase. Access to care, local bus services, suitable housing and other essential services all shape whether older people can live independently.”