Following Chancellor Rachel Reeves’ announcement that the personal allowance will remain frozen until April 2031, campaigners have warned that more pensioners could be drawn into paying income tax as the state pension increases. This includes some older people with modest workplace or private pensions who may not have expected to become liable for tax in retirement.
The issue was highlighted in the Express following parliamentary discussion of a petition calling on the Government to reconsider the impact of the frozen threshold. Campaigners argue that the policy risks undermining retirement security by gradually increasing the number of pensioners affected through a process known as “fiscal drag”.
As incomes rise while tax thresholds remain unchanged, more people can be pulled into the tax system even when their overall financial circumstances have not significantly improved. For pensioners who have worked, paid taxes and planned carefully for later life, this has raised concerns about fairness and financial stability.
Sally Tsoukaris said:
“Pensioners have worked hard, paid tax throughout their lives and planned for retirement on the basis that the state pension would provide some security in later life. They shouldn’t now be dragged into paying more tax by stealth.
“Freezing the personal allowance while the state pension rises means more older people are being pulled into the tax system. That includes many with only modest occupational or private pensions.”
She added:
“If the Government is serious about dignity in later life, it needs to stop treating pensioners as an easy target.”
As part of Later Life Ambitions, we continue to raise concerns about the impact of tax changes on older people and the importance of ensuring retirement incomes are protected.
This issue forms part of the wider LLA Budget for Later Life, which sets out a number of measures to improve fairness for pensioners. We’re calling for tax thresholds to be linked to inflation to prevent unfair real-terms tax increases, and for the basic income tax threshold to be reviewed.
The CSPA will continue to support these calls and ensure that the experiences and concerns of pensioners are represented in discussions about pensions, taxation and later life.
